Nonzero transaction costs invalidate the Black-Scholes (1973) arbitrage argument based on continuous trading. Leland (1985) developed a hedging strategy which modifies the Black-Scholes hedging strategy with a volatility adjusted by the length of the rebalance interval and the rate of the...

This paper examines whether the favorite/long-shot bias that has been found in gambling markets (particularly horse racing) applies to options markets. We investigate this for the Samp;P 500 futures, the FTSE 100 futures and the British Pound/US Dollar futures for the seventeen plus years from...

We consider the presence of regimes in currency markets and their implications for interest rate parity. A weak form of interest rate parity is postulated and tested which assumes that the hedged risk premiums are identical within each regime across currencies. Both the in-sample (January 2002 -...

Financial disasters to hedge funds, bank trading departments and individual speculative traders and investors seem to always occur because of non-diversification in all possible scenarios, being overbet and being hit by a bad scenario. Black swans are the worst type of bad scenario: unexpected...

This paper extends Merton’s continuous time (instantaneous) mean-varianceanalysis and the mutual fund separation theory. Given the existence of a Marko-vian state price density process, the optimal portfolios from concave utility max-imization are instantaneously mean-variance efficient...

Financial disasters to hedge funds, bank trading departments and individual speculative traders and investors seem to always occur because of non-diversification in all possible scenarios, being overbet and being hit by a bad scenario. Black swans are the worst type of bad scenario: unexpected...

The January effect is concerned with high stock returns in January, especially by small cap stocks. Transactions costs, especially price pressures, make it difficult to take advantage of this anomaly. However, these costs are minimal in the futures markets. This paper discusses the results of...

The Kelly Capital Growth Investment Strategy (KCGIS) is to maximize the expected utility of nal wealth with a logarithmic utility function. This approach dates to Bernoulli's 1738 suggestion of log as the utility function arguing that marginal utility was proportional to the reciprocal of...

Pension funds typically suggest the 60-40 stock-bond rule to lower risk as during stock market declines bonds tend to rise. However, US investment returns have been presidential party dependent; and returns in the last two years of all administrations exceed those in the first two years. The...

The period May 1 to the turn of the month of November (last five trading days October) has historically produced negligible returns. The rest of the year (late October to the end of April) has essentially all the year's gains. In this paper we show that there is a statistically significant...