Recently, Kat and Palaro (2005) showed how dynamic trading technology can be used to create dynamic futures trading strategies (or 'synthetic funds' as we call them), which generate returns with predefined statistical properties. In this paper we put their approach to the test. In a set of four...

With the arrival of synthetic funds, investment management no longer has to resemble a visit to The Mongolian Barbeque. Investors no longer have to go through the usual process of finding and combining individual assets and funds into portfolios in an, often only partially successful, attempt to...

We use stochastic simulation methods to study the efficiency of delta-hedging strategies for ordinary, look-back, and Asian call options on the Samp;P 500 index. Execution is assumed to take place in either the cash or the futures market. Our results clearly show the inadequacy of delta hedging...

We compare the binomial pricing methods for lookback options developed by Babbs (1992), Hull and White (1993), and Cheuk and Vorst (1994). The Babbs and the Cheuk and Vorst methods are very similar in nature and essentially two applications of the same transformation. The Hull and White method...

In this paper we study the pricing of barrier options where the period during which the underlying price is monitored for barrier hits is restricted to only part of the options' lifetime. We derive closed-form formulas for the prices of a number of partial barrier options, including partial...

In this paper we study the univariate return properties of a large variety of commodity futures. Our analysis shows that the volatility of commodity futures is comparable to that of US large cap stocks. Yet, with the exception of energy, a consistently positive risk premium is lacking in...

Several authors have published analytical formulas for barrier options. Unfortunately, the specifications of the options studied do not match those of the options typically traded in the OTC market. One major difference concerns the frequency with which the reference index is monitored. Where...

With traditional barrier options, life and death of the option are determined by the same reference index as the index underlying the original option contract. It is, however, also possible to structure options where a second reference index determines whether the option knocks in or out. In...

Lookback options provide investors with perfect market timing services. However, these options are hardly ever traded because they are much more expensive than ordinary options. The problem with standard lookbacks is that they provide the investor with much more timing than typically required....

In this article we present a model of Samp;P 500 futures mispricing that is able to capture all major stylized facts observed in actual Samp;P 500 mispricings behavior. The model itself is inspired by theoretical considerations as well as empirical observations. The model's parameters are...