<section xml:id="fut21642-sec-0001"> I investigate how local supply shocks in the globally distributed production of commodities are incorporated into Chicago Mercantile Exchange (CME) futures prices. I exploit that the soybean market share of the United States (Argentina) decreased (increased) between 1996 and 2010, and use rain,...</section>

We study the hedging and valuation of generalized variance swaps de¯ned on a forward swap interest rate. Our motivation is the fundamental role of variance swaps in the transfer of variance risk, and the extensive empirical evidence documenting that the variance realized by interest rates is...

The mechanism of aggregation of various sources of fundamental information into a single price is a central question in asset pricing. In this paper I investigate how information about local supply shocks in the globally distributed production of commodities is incorporated into the prices of...

We study the hedging and valuation of generalized variance swaps defined on a forward swap interest rate. Our motivation is the fundamental role of variance swaps in the transfer of variance risk, and the extensive empirical evidence documenting that the variance realized by interest rates is...

This paper develops methods for relating the prices of discrete- and continuous-time versions of path-dependent options sensitive to extremal values of the underlying asset, including lookback, barrier, and hindsight options. The relationships take the form of correction terms that can be...

This paper develops a method for selecting and analysing stress scenarios for financial risk assessment, with particular emphasis on identifying sensible combinations of stresses to multiple factors. We focus primarily on reverse stress testing - finding the most likely scenarios leading to...

Interconnections among financial institutions create potential channels for contagion and amplification of shocks to the financial system. We estimate the extent to which interconnections increase expected losses and defaults under a wide range of shock distributions. In contrast to most work on...

Contingent capital in the form of debt that converts to equity when a bank faces financial distress has been proposed as a mechanism to enhance financial stability and avoid costly government rescues. Specific proposals vary in their choice of conversion trigger and conversion mechanism. We...

We derive and analyze Monte Carlo estimators of price sensitivities ("Greeks") for contingent claims priced in a diffusion model. There have traditionally been two categories of methods for estimating sensitivities: methods that differentiate paths and methods that differentiate densities. A...

Interconnections among financial institutions create potential channels for contagion and amplification of shocks to the financial system.  We propose precise definitions of these concepts and analyze their magnitude.  Contagion occurs when a shock to the assets of a single firm causes other...