In this article we show how a project's option value increases with incremental levels of investment and dis-investment flexibility. We do this by presenting two NPV and seven option pricing models in a strict sequence of increasing flexibility. We illustrate each with numerical examples and...

We compare forecasts of the realized volatility of the pound, mark and yen exchange rates against the dollar, calculated from intraday rates, over horizons ranging from one day to three months. Our forecasts are obtained from a short memory ARMA model, a long memory ARFIMA model, a GARCH model...

We compare the long run reaction to anticipated and surprise information announcements using stock splits. Although there is underreaction in both cases, anticipated splits are treated differently to those that are unforeseen. After anticipated splits, cumulative abnormal returns peak at...

The study of Ferguson and Shockley (2003) shows that, if the Merton (1974) model can reflect reality, the omission of debt claims from the market portfolio proxy may explain the poor pricing ability of the CAPM in empirical tests. We critically re-assess this argument by first reviewing...

We compare density forecasts of the Samp;P 500 index from 1991 to 2004, obtained from option prices and daily and five-minute index returns. Risk-neutral densities are given by using option prices to estimate diffusion and jump-diffusion processes, that incorporate stochastic volatility, and...

The aim of this paper is to establish a basic framework of financing with a highly flexible instrument, of Participating Mortgages (PMs), to improve the efficiency of the financial system. We distinguish these from convertible mortgages and derive closed-form solutions to price a whole framework...