Heterogeneity and evolutionary behaviour of investors are two of the most important characteristics of financial markets. This papers incorporates the adaptive behaviour of agents with heterogeneous beliefs and establishes an evolutionary capital asset pricing model (ECAPM) within the...

We investigate the partial differential equation (PDE) for pricing interest derivatives in the multi-factor Cheyette Model, which involves time-dependent volatility functions with a special structure. The high dimensional parabolic PDE that results is solved numerically via a modified sparse...

This article provides a generalized two-firm model of default correlation, based on the structural approach that incorporates interest rate risk. In most structural models default is driven by the firms' asset dynamics. In this article, a two-firm model of default is instead driven by the...

We consider a Heath-Jarrow-Morton models for the term structure of interest rates in which the forward rate volatility is a function of the instantaneous spot rate of interest, a set of dicrete forward rates and time to maturity of the bond. We show how the stochastic dynamics may be expressed...

In this paper we investigate further the 34D applied structural model whose extensive form we introduced in Chiarella and Flaschel (1999c). Here we express the model in terms of intensive form state variables, thereby abstracting from the underlying growth trend. We explain the dynamic (and...

In this paper we investigate the dynamics of the traditional cobweb model where producres are risk averse and seek to learn the distribution of asset prices. We consider the subjective estimates of the statistical distribution of the market prices based on L-step backward time series of market...

This paper builds upon the authors' previous work on transformation of the Heath-Jarrow-Morton (HJM) model of the term structure of interest rates to state space form for a fairly general class of volatility specification including stochastic variables. Estimation of this volatility function is...

This study examines the interrelation between small traders' open interest and large hedging and speculation in the Canadian dollar, Swiss franc, British pound, and Japanese yen futures markets. The results, based on Granger-causality tests and vector autoregressive models, suggest that small...

The stochastic or random nature of commodity prices plays a central role in models for valuing financial contingent claims on commodities. In this paper, by enhancing a multifactor framework which is consistent not only with the market observable forward price curve but also the volatilities and...

This paper examines the dynamics of financial distress and in particular the mechanism of transmission of shocks from the financial sector to the real economy. The analysis is performed by representing the linkages between microeconomic financial variables and the aggregate performance of the...