This paper studies the information content of the S&P 500 and VIX markets on the volatility of the S&P 500 returns. We estimate a flexible affine model based on a joint time series of underlying indexes and option prices on both markets. An extensive model specification analysis reveals that...

We study the intra-horizon value at risk (iVaR) in a general jump diffusion setup and propose a new model of asset returns called displaced mixed-exponential model, which can arbitrarily closely approximate finite-activity jump-diffusions and completely monotone Levy processes. We derive...

In this paper we begin with details of the no arbitrage pricing scheme. It is common to call the pricing approach no arbitrage if it is impossible to receive a positive profit on a contract starting from zero investment at initiation date. We specify no arbitrage pricing by a) initiation and...

In some papers it have been remarked that derivation of the Black Scholes Equation (BSE) contains mathematical ambiguities. In particular there are two problems which can be raise by accepting Black Scholes (BS) pricing concept. One is technical derivation of the BSE and other the pricing...

In this paper we develop a model of corporate bonds pricing. We begin with default definition which is similar to one that is used in the standard reduced form of default model. The primary distinction between our model and reduced form of default model is interpretation of the date-t price of...