Empirical evidence suggests that agricultural futures price movements have fat-tailed distributions and exhibit sudden and unexpected price jumps. There is also evidence that the volatility of futures prices contains a term structure depending on both calendar-time and time to maturity. This...

An anchoring adjusted currency option pricing formula is developed in which the risk of the underlying currency is used as a starting point which gets adjusted upwards to arrive at the currency call risk. Anchoring bias implies that such adjustments are insufficient. The new formula converges to...

Recently academic researchers and practitioners have use the asymptotic expansion method to examine a variety of financial issues under high-dimensional stochastic environments. This methodology is mathematically justified by Watanabe theory (Watanabe, 1987), and Malliavin calculus (Yoshida,...

Purpose – Recent failures and scandals in the banking and financial services industry have served as catalysts for anxiety about operational risk. In particular, the Basel II accord emphasises the need to develop methodologies for assessing and managing this category of risk. However,...

The economic-political instability of a country, which is tied to its credit risk, often leads to sharp depreciation and heightened volatility in its currency. This paper shows that not only the creditworthiness of the euro-area countries with weaker fiscal positions but also that of the member...

Purpose - This study seeks to examine the effectiveness of controlling the currency risk for international diversified mixed-asset portfolios via two different hedge instruments, currency forwards and currency options. So far, currency forward has been the most common hedge tool, which will be...