This paper examines both the in-sample and out-of-sample performance of three monetary fundamental models of exchange rates and compares their out-of-sample performance to that of a simple Random Walk model. Using a data-set consisting of five currencies at monthly frequency over the period...

Faced with the problem of pricing complex contingent claims, investors seek to make their valuations robust to model uncertainty. We construct a notion of a model-uncertainty-induced utility function and show that model uncertainty increases investors’ effective risk aversion. Using this...

The eight years from 2000 to 2008 saw a rapid growth in the use of securitization by UK banks. We aim to identify the reasons that contributed to this rapid growth. The time period (2000 to 2010) covered by our study is noteworthy as it covers the pre- financial crisis credit-boom, the peak of...

This paper examines both the in-sample and out-of-sample performance of three monetary fundamental models of exchange rates and compares their out-of-sample performance to that of a simple Random Walk model. Using a data-set consisting of five currencies at monthly frequency over the period...

The eight years from 2000 to 2008 saw a rapid growth in the use of securitization by UK banks. We aim to identify the reasons that contributed to this rapid growth. The time period (2000 to 2010) covered by our study is noteworthy as it covers the pre-financial crisis credit- boom, the peak of...

Faced with the problem of pricing complex contingent claims, an investor seeks to make his valuations robust to model uncertainty. We construct a notion of a model- uncertainty-induced utility function and show that model uncertainty increases the investor's effective risk aversion. Using the...

We study the asymmetric and dynamic dependence between financial assets and demonstrate, from the perspective of risk management, the economic significance of dynamic copula models. First, we construct stock and currency portfolios sorted on different characteristics (ex ante beta, coskewness,...

Vanilla (standard European) options are actively traded on many underlying asset classes, such as equities, commodities and foreign exchange (FX). The market quotes for these options are typically used by exotic options traders to calibrate the parameters of the (risk-neutral) stochastic process...

We examine the optimal hedging of derivatives written on realised variance, focussing principally on variance swaps (VS) (but, en route, also considering skewness swaps), when the underlying stock price has discontinuous sample paths, i.e. jumps. In general, with jumps in the underlying, the...