The use of close-to-close returns underestimates returns correlation because international stock markets have different trading hours. With the availability of 16:00 (London time) stock market series, we find dynamics of daily correlation and daily covariance, estimated using two...

This paper models the effect of transaction costs and taxes on asset pricing in a multi-period setting. It extends the study by Dermody and Rockafellar (DR)(1991), where it was shown that term structure valuation is agent-specific owing to agents' different tax classes, and that a multiplicity...

This paper compares the pricing and hedging performance of the LMM model against two spot-rate models, namely Hull-White and Black-Karasinski, and the more recent Swap Market Model from an Asset-Liability-Management (ALM) perspective. In contrast to previous studies in the literature, our...

This paper re-examines the issue of persistence and mean reversion in UK stock returns in the light of new developments published in Chow and Denning (1993). The random walk hypothesis is tested using multiple variance ratios for returns on the Financial Times All Share Index and 330 individual...

This paper re-examines the issues of persistence and mean reversion in UK stock returns in the light of new developments published in Chow and Denning (1993). The random walk hypothesis is tested using multiple variance ratios for returns on the Financial Times All Share Index and 330 individual...

This paper presents and tests a model of the volatility of individual company stocks derived from option prices. The data comes from 63 traded options quoted on the London International Financial Futures Exchange. The model relates volatilities to earnings announcement dates, interest rate...

We derive closed form European option pricing formulae under the general equilibrium framework for underlying assets that have an <InlineEquation ID="IEq1"> <EquationSource Format="TEX">$$N$$</EquationSource> <EquationSource Format="MATHML"> <math xmlns:xlink="http://www.w3.org/1999/xlink"> <mi>N</mi> </math> </EquationSource> </InlineEquation>-mixture of transformed normal distributions. The component distributions need not belong to the same class but must all be transformed normal. An...</equationsource></equationsource></inlineequation>

The recent financial crisis has accentuated the fact that extreme outcomes have been overlooked and not dealt with adequately. While extreme value theories have existed for a long time, the multivariate variant is difficult to handle in the financial markets due to the prevalent...