We develop a numerical approximation method for valuing multivariate contingent claims. The approach is based on an n-dimensional extension of the lattice binomial method. Closed-form solutions for the jump probabilities and the jump amplitudes are obtained. The accuracy of the method is...

This paper is a contribution to the Proceedings of the Workshop Complexity, Metastability and Nonextensivity held in Erice 20-26 July 2004, to be published by World Scientific. We propose a generalization to Merton's model for evaluating credit spreads. In his original work, a company's assets...

Frontmatter -- Contents -- Streetwise -- Introduction -- PART ONE: Market Behavior -- Challenge to Judgment (Fall 1974) -- The Dividend Puzzle (Winter 1976) -- The Capital Asset Pricing Model and the Market Model (Winter 1981) -- Factors in New York Stock Exchange Security Returns, 1931-1979...

When stock returns are assumed to be lognormally distributed, there are well known formulae for converting the mean and variance of log returns into the mean and variance of proportional returns, and vice versa. We derive an approximation to the mean and variance of proportional returns when log...