A general approach for calibrating Monte Carlo models to the market prices of benchmark securities is presented. Starting from a given model for market dynamics (price diffusion, rate diffusion, etc.), the algorithm corrects price-misspecifications and finite-sample effects in the simulation by...

Bid and ask sizes at the top of the order book provide information on short-term price moves. Drawing from classical descriptions of the order book in terms of queues and order-arrival rates (Smith et al (2003)), we consider a diffusion model for the evolution of the best bid/ask queues. We...

The daily rebalancing of a leveraged exchange traded fund(LETF) requires the fund manager to systematically modify the amount of index exposure. In order to achieve the investment objective of the fund, managers of LETFs use total return swaps with the appropriate leverage ratio. This daily...

In this paper we developed an econometric model to empirically test the hard-to-borrow model of Avellaneda and Lipkin (2009) where asset prices jump as result of "buy-in" procedures. The model is estimated using an extent version of simulated maximum likelihood (SML) for a selected group of...