In this paper I attempt to estimate the risk premiums in energy markets using the closing prices from futures and options contracts of natural gas. Solving for the instantaneous parameters is conducted over several parametric models where the results suggest a model that incorporates both return...

Empirical studies on credit spread determinants are predicated on the presence of a single-regime over the entire sample period and thus find limited explanatory power. We show that a single regime model hides the fact that the explanatory variables take on different loadings across changing...

While macro-corporate-governance (e.g., addressing how a governance process should be administered within a corporate structure) seems to be widely discussed in academic literature, a discussion of micro-corporate-governance (e.g., assessing specific models, including regarding whether they...

We show that disentangling sentiment-induced biases from fundamental expectations significantly improves the accuracy and consistency of probabilistic forecasts. Using data from 1994 to 2017, we analyze 15 stochastic models and risk-preference combinations and in all possible cases a simple...

This paper presents a tractable model of non-linear dynamics of market returns using a Langevin approach.Due to non-linearity of an interaction potential, the model admits regimes of both small and large return fluctuations. Langevin dynamics are mapped onto an equivalent quantum mechanical (QM)...

This paper is an addendum to Henry C. Wurts, On micro-Corporate-Governance (micro-CG) issues regarding the Malliaris Single-Sentence (MSS) Derivation of the Black-Scholes-Merton (BSM) Equation, as a demonstration that Derivations Matter (DM) (August 28, 2021). Available at SSRN:...

The Black-Scholes-Merton (BSM) Equation, a deterministic fundamental partial differential equation (PDE) used to characterize price-movement of broad derivative financial instruments based on a stochastic representation of price-movement of a primitive financial instrument, can be derived from a...

This paper provides a retrospect of the Black-Scholes-Merton (BSM) argument that is used to derive the common BSM formula. The paper utilizes and builds upon a frame used to provide a retrospect of the Put-Call Parity (PCP) provided in Wurts (2018a). Accordingly, this paper fills a promise that...

Using a real-time random regime shift technique, we identify and discuss two different regimes in the dynamics of credit spreads during 2002-2012: a liquidity regime and a default regime. Both regimes contribute to the patterns observed in credit spreads. The liquidity regime seems to explain...

Credit risk models like Moody's KMV are now well established in the market and give bond managers reliable estimates of default probabilities for individual firms. Until now it has been hard to relate those probabilities to the actual credit spreads observed on the market for corporate bonds....