Market mechanisms are increasingly being used as a tool for allocating somewhat scarce but unpriced rights and resources, such as air and water. Tradable permits have emerged as the most cost effective measure leading to the emergence of both nationwide (SO2 ) and supranational (CO2 ) emission...

This paper derives an analytic expression for the distribution of the average volatility in the stochastic volatility model of Hull and White. This result answers a longstanding question, posed by Hull and White (Journal of Finance 42, 1987), whether such an analytic form exists. Our findings...

We model the dynamics of asset prices and associated derivatives by considerationof the dynamics of the conditional probability density process for the value of an assetat some specied time in the future. In the case where the asset is driven by Brownianmotion, an associated \master equation"...

This paper discusses the pitfalls in the pricing of barrier options using approximations of the underlying continuous processes via discrete lattice models. These problems are studied first in a Black-Scholes model. Improvements result from a trinomial model and a further modified model where...

In this article, we describe the various sorts of American Parisian options and propose valuation formulae. Although there is no closed-form valuation for these products in the non perpetual case, we have been able to reformulate their price as a function of the exercise frontier. In the...

This paper presents a new method to detect informed trading activities in the options markets.An option trade is identified as informed when it is characterized by an unusual largeincrement in open interest and volume, induces large gains, and is not hedged in the stock market.For the period...

The paper shows how a particular optimization heuristic, called threshold accepting, can be successfully used to solve complex portfolio choice problems.

Nonlinear AC Optimal Power Flow (OPF) problems are commonly approximatedby linearized DC OPF problems to obtain real power solutions for restructured wholesalepower markets. We first present a standard DC OPF problem, which has thenumerically desirable form of a strictly convex quadratic...

Linear Methods are often used to compute approximate solutions to dynamic models, as these models often cannot be solved analytically. Linear methods are very popular, as they can easily be implemented. Also, they provide a useful starting point for understanding more elaborate numerical...

Real options present a wide topic in investment litterature nowadays. However, despite bigadvances in the single asset investment pricing, the theory is miser of informations aboutproblems involving more than one asset. We show in this paper that using dynamic programming,one can find an...