In this paper we consider the pricing of an American call option whose underlying asset dynamics evolve under the influence of two independent stochastic volatility processes as proposed in Christoffersen, Heston and Jacobs (2009). We consider the associated partial differential equation (PDE)...

This paper proposes an auxiliary particle filter algorithm for inference in regime switching stochastic volatility models in which the regime state is governed by a first-order Markov chain. We proposes an ongoing updated Dirichlet distribution to estimate the transition probabilities of the...

The intention of this study was to document how closely households follow normative descriptions of financial behavior in relation to their financial planning horizon. Modern Portfolio Theory predicts that households, in general, exhibit risk aversion. Aversion to wealth volatility should...

In this paper we consider the pricing of an American call option whose underlying asset dynamics evolve under the influence of two independent stochastic volatility processes of the Heston (1993) type. We derive the associated partial differential equation (PDE) of the option price using hedging...

This paper provides a theoretical explanation for the heteroscedasticity of asset returns. In line with existing empirical results, our model yields an asymmetric relationship between stock return and volatility. Based on the simple assumptions that investors behave according to Prospect Theory...

Why does natural resource wealth prolong incumbency? Using evidence from parliamentary elections in the Islamic Republic of Iran, I show that natural resource revenues boost incumbent reelection rates because this revenue is used to provide public or private goods to constituents, incentivizing...

The paper investigates the extent to which the dollar/sterling exchange rate fluctuations affect coffee and cocoa futures prices on the London LIFFE and the New York CSCE by means of multivariate GARCH models - under the assumption that traders in perfectly competitive markets have equal access...

This paper analyzes the relationship between stock returns and exchange rate changes in international markets and examines how well exchange rate volatility explains movements in stock market returns. The model-based predictions are evaluated on several cost functions. Results from such analysis...

In this paper we examine the issue of asymmetry in the return and volatility spillover effects from the US equity market into the Canadian and Mexican equity markets. We model the conditional volatility of the returns in each of the three markets using the asymmetric power model of Ding, Granger...

In this paper we investigate the volatility structure of the German stock market index DAX and its constituents. Using a recently developed test, we find a volatility break in 1997. Interestingly, not only is the volatility higher after 1997 but the volatility persistence also increased. That...