We consider an irreversible investment in a project, which generates cash flow following a double exponential jump-diffusion process and its expected return is governed by a continuous-time two-state Markov chain. If the expected return is observable, we present explicit expressions for the...

Modelling correlation between financial quantities is important in the accurate pricing of financial derivatives. In this paper, we introduce some stochasticity in correlation, by considering a regime-switching correlation model, in which the transition rates between regimes are given. We...

We study both theoretically and empirically option prices on firms undergoing a cash merger offer. To estimate the merger's success probability, we use a Markov Chain Monte Carlo (MCMC) method using a state space representation of our model. Our estimated probability measure has significant...