In this paper we ‘update’ the option implied probability of default (option iPoD) approach recently suggested in the literature. First, a numerically more stable objective function for the estimation of the risk neutral density is derived whose integrals can be solved analytically. Second,...

This chapter aims to provide a hands-on approach to New Keynesian models and their uses for macroeconomic policy analysis. It starts by reviewing the origins of the New Keynesian approach, the key model ingredients and representative models. Building blocks of current-generation dynamic...

This paper is concerned with modelling time series by single hidden-layer feedforward neural network models. A coherent modelling strategy based on statistical inference is presented. Variable selection is carried out using existing techniques. The problem of selecting the number of hidden units...

We analyze American put options in a hyper-exponential jump-diffusion model. Our contribution is threefold. Firstly, by following a maturity randomization approach, we solve the partial integro-differential equation and obtain a tight lower bound for the American option price. Secondly, our...

Researchers and practitioners who use Data Envelopment Analysis often want to incorporate several inputs and outputs in their model to consider as much relevant information as possible. However, too many inputs and outputs can result in the well-known dimensionality problem referred to as the...

The stochastic simulation model suggested by Bolder (2003) for the analysis of the federal government's debt-management strategy provides a wide variety of useful information. It does not, however, assist in determining an optimal debt-management strategy for the government in its current form....

Tutorial on valuation of mortgage backed securities and collateralized mortgage obligations, including: - Structure of the mortgage market - Prepayment modeling - OAS analysis - Interest rate modeling - Numerical methods - Parallelization

This paper presents a new option pricing approach for all underlying assets that precisely fits the market data. We obtain the probability density function of the underlying asset without any external parameter. The density function for a given expiration date is uniquely determined by the...

We propose a simple non-equilibrium model of a financial market as an open system with a possible exchange of money with an outside world and market frictions (trade impacts) incorporated into asset price dynamics via a feedback mechanism. Using a linear market impact model, this produces a...

This paper analyses the implementation and calibration of the Heston Stochastic Volatility Model. We first explain how characteristic functions can be used to esti-mate option prices. Then we consider the implementation of the Heston model, showing that relatively simple solutions can lead to...