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...

This paper incorporates investor preferences for return distributions' higher moments into a Polynomial Goal Programming (PGP) optimisation model. This allows us to solve for multiple competing hedge fund allocation objectives within a mean -variance - skewness - kurtosis framework. Our...

Most previous tests of hedge fund performance have failed to model the exposure of hedge fund returns to systematic non-normality risks, nor have they taken the tactical asset allocation decisions of hedge funds managers into account. This paper shows that failure to account for these features...

Since the publication of our first paper on hedge fund replication in 2005, our FundCreator methodology has met with many positive reactions. There have also been some negative responses though. With investors clearly becoming confused as a result of the amount of disinformation that is being...

In this paper we study the multivariate return properties of a large variety of commodity futures. We find that between commodity groupings (such as metals, energy, etc.) correlations are very low and mostly insignificant whereas within groups they tend to be much stronger. In addition,...

Interest rates are currently at a historical low. Since in the longer run interest rates will return to their historical average, this implies that bond prices are about to fall. Popular investment advice therefore says that investors should shorten the maturity of their bond portfolios to...

In this paper we use the hedge fund return replication technique recently introduced by Kat and Palaro (2005) to evaluate the net-of-fee performance of 1917 individual hedge funds. Comparing fund returns with the returns on dynamic futures trading strategies with the same risk and dependence...

In this paper we use a scenario-based ALM model to study the impact of different interest rate derivatives strategies on the risk-return profile of a defined benefit pension fund. The results show that properly constructed hedging strategies using swaps and swaptions can add substantial value....

Digitals are contracts that pay a fixed amount of money if at maturity the reference index is above (for a call) or below (for a put) some specific value. One can easily extend this conceptto a bivariate setting and create a contract that pays a fixed amount if both reference indices are above...