The representative agent paradigm with homogeneous expectations has been the dominant framework for the development of theories in portfolio analysis, equilibrium asset pricing and derivative pricing. Homogeneous expectations is the major assumption underlining the most widely used financial...

Institutional investors are now the predominant type of investor in global financial markets. Institutional investors now own more than 64% of the equity in the US stock markets (Federal Reserve Board 2011). In Australia, institutional investors own approximately 60% of the stock market. They...

This thesis concerns the design and analysis of new discrete time approximations for stochastic differential equations (SDEs) driven by Wiener processes and Poisson random measures. In financial modelling, SDEs with jumps are often used to describe the dynamics of state variables such as credit...

This thesis models commodity prices and derivatives, written on commodity prices, under the benchmark approach. Under this approach, the commodity prices are modeled under the real world probability measure while the corresponding numeraire is the numeraire portfolio (NP), which is the growth...

One of the most successful and most controversial innovative financial products in recent years has been collateralised debt obligations (CDOs). The dimensionality of dependency embedded in a typical CDO structure poses great challenges for researchers - in both generating realistic default...

Disclosure rules directly affect the availability of information to investors and therefore influence their choices. Australia has a unique disclosure environment whereby firms are required to immediately disclose any information that could have an effect on the price of the firm’s securities....

Research on the pricing of multifactor American options has been growing at a slow pace due to the curse of dimensionality. If we start to consider the pricing of American option contracts written on more than one underlying asset or relax the constant volatility assumption of the Black and...

Empirical evidence strongly suggests that interest rate volatility is stochastic and correlated to changes in interest rates. In addition, the intensity process has been shown to generate heavy-tailed behavior and this has been attributed to stochastic volatility. A good credit risk model should...

In the past five years, it has become clear that there is no longer such a thing as a single "risk-free" interest rate term structure for each currency in the market, and proper pricing of cash ows must take into account basis spreads and collateralisation. An aspect of this issue is considered...

The phenomenon of the frequency basis (i.e. a spread applied to one leg of a swap to exchange one oating interest rate for another of a different tenor in the same currency) contradicts textbook no-arbitrage conditions and has become an important feature of interest rate markets since the...