In this paper we investigate portfolio coskewness using a quadratic market model as return generating process. It is shown that portfolios of small (large) firms have negative (positive) coskewness with market. An asset pricing model including coskewness is tested through the restrictions it...

The persistence of financial instability calls into question the adequacy of the current regulatory regime. Acritical review of the three pillars at the core of current financial regulation exposes some structural flaws.[...]

We derive analytically the first four conditional moments of the integrated variance implied by the GARCH diffusion process. From these moments we obtain an analytical closed-form approximation formula to price European options under the GARCH diffusion model.Using Monte Carlo simulations, we...

We propose a simple class of multivariate GARCH models, allowing for time-varying conditional correlations. Estimates for time-varying conditional correlations are constructed by means of a convex combination of averaged correlations (across all series) and dynamic realized (historical)...

The pricing of bonds and bond options with default risk is analyzed in the general equilibrium model of Cox, Ingersoll, and Ross (Cir, 1985). This model is extended by means of an additional parameter in order to deal with financial and credit risk simultaneously. The estimation of such a...

This paper develops and tests the notion that postannouncement prices from stock and option markets can be used to infer both the probability of success and timing of an attempted takeover. Using a sample of 65 cash tender offers from January 1980 to July 1989, we demonstrate that the pattern of...

Assets and liabilities management practices currently in use are reviewed. Some of the improvements currently under development are presented. Potential problems in the application of current ALM techniques to universal banks are considered

This paper develops and tests the notion that it is possible to use the post-announcement prices from the stock and option markets to infer both the probability of success and timing of an attempted takeover. Using a sample of 65 cash tender offers from the period January 1980 to July 1989, we...

The pricing of bonds and bond options with default risk is analyzed in the general equilibrium model of Cox, Ingersoll, and Ross (1985). This model is extended by means of an additional parameter in order to deal with financial and credit risk simultaneously. The estimation of such a parameter,...

We propose a new method for pricing options based on GARCH models with filtered historical innovations. In an incomplete market framework, we allow for different distributions of historical and pricing return dynamics, which enhances the model's flexibility to fit market option prices. An...