Theory suggests that competition tends to equalize profit rates through the process of capital reallocation, and numerous studies have confirmed that profit rates are indeed persistent and mean-reverting. Recent empirical evidence further shows that fluctuations in the profitability of surviving...

Certificates are structured financial instruments that aim to provide investors with investment solutions tailored to their needs. Certificates can be modeled using a bond component and a derivative component, typically an options strategy. The pricing of certificates is typically performed...

We introduce a novel stochastically correlated two-factor (i.e., bivariate) diffusion process under the square-root format, for which we analytically obtain the corresponding solutions for the conditional moment-generating functions and conditional characteristic functions. Such solutions...