We propose a tractable model for the exchange rate in a target zone with realignment. The target zone exchange rate dynamics is assumed to obey a bounded regular diffusion with two-sided unattainable barriers. The realignment is modeled as a continuous-time two-state Markov chain. Under the...

We propose a term structure of forward rates driven by a kernel-correlated Levy random field under the HJM framework. The kernel-correlated Levy random field is composed of a kernel-correlated Gaussian random field and a centered Poisson random measure. We shall give a criterion to preclude...

We examine the notion that financial products which cater to investors' behavioral biases can attain popularity and yield substantial profits for issuers. Our setting considers options with a callback feature, namely, callable bull/bear contracts (CBBCs). These contracts have high skewness when...

We use proprietary brokerage data to study trading patterns within a well-known financial market bubble: that in the Chinese warrants market. Persistently successful investors traded very actively and exhibited characteristics of de facto market makers. Unskilled investors unprofitably...

We obtain an explicit formula for the bilateral counterparty valuation adjustment of a credit default swaps portfolio referencing an asymptotically large number of entities.We perform the analysis under a doubly stochastic intensity framework, allowing for default correlation through a common...