We introduce a new theoretically-based method of estimating the impact of the exchange rate and GDP on the stock market. In doing so, we utilize the new stochastic-factor model (a recent development in mathematical finance). Our results indicate a strong negative relationship between the stock...

We develop a simple and general method for solving non-linear Hamilton-Jacobi-Bellman partial differential equations HJB PDEs. We apply our method to the portfolio model.

This paper presents a rigorous test of statistical independence (as opposed to lack of correlation) between two random variables.

Previous research assumes that 1) the futures price is a linear function of the market (spot) price and basis risk; 2) the spot price and basis risk are statistically independent. Using a general form of basis risk, we provide empirical comparative statics results. Moreover, we relax the...

We present new stochastic differential equations, that are more general and simpler than the existing Ito-based stochastic differential equations. As an example, we apply our approach to the investment (portfolio) model.

We present a new simple method of estimating stochastic volatility and its volatility. This method is applicable to both cross-sectional and time-series data. Moreover, this method does not require volatility data series.