In this paper we extend the results derived in our earlier work to develop a methodology to employ the maximum-likelihood estimation technique for the pricing of interest rate instruments. In order to price bonds and their derivative assets, researchers must identify a preference parameter in...

Extant models of exchange rate behavior have typically relied on statistical rather than economic considerations. The approach has been to employ a variant of the generalized central limit theorem to develop tests for the models proposed. We propose a minimal set of simple economic restrictions...

In this paper we specify the basic set of economic criteria that any diffusion-driven interest rate or FX rate process must satisfy. We also develop the methodology that is implementable to test the validity of a proposed process insofar as it satisfies the basic criteria as well as the actual...