Toby Daglish and Nimesh Patel discuss the rationale behind banks charging break-fees to recoup their losses as a result of customers prepaying loans. Next they chart the historical levels of these for New Zealand. Lastly they develop a model which allows for fluctuations both in banks' wholesale...

We present a closed form solution for the optimal hedging strategy in discrete time of an option whose underlying security follows the Heston Stochastic Volatility process. Our Monte Carlo simulations indicate that this significantly improves hedging performance at weekly and longer hedging...