Several authors have published analytical formulas for barrier options. Unfortunately, the specifications of the options studied do not match those of the options typically traded in the OTC market. One major difference concerns the frequency with which the reference index is monitored. Where...

In this article we present a model of Samp;P 500 futures mispricing that is able to capture all major stylized facts observed in actual Samp;P 500 mispricings behavior. The model itself is inspired by theoretical considerations as well as empirical observations. The model's parameters are...

Derivatives traded in the OTC markets may sometimes involve both asset price risk and exchange rate risk. This article provides an unified treatment of the pricing and hedging of path independent international equity derivatives. After modeling the international economy, we derive a partial...

This article describes the valuation, hedging and applications of contingent premium options (CPOs). We derive closed-form formulas for path independent and path dependent CPOs that address most cases of practical importance. The resulting hedge ratios show that when it is not possible to hedge...

In this article we use stochastic simulation methods to study the performance of a number of different dynamic portfolio insurance strategies, including option replicating portfolio insurance (ORPI), constant proportion portfolio insurance (CPPI) and a modified stop-loss (MSLI) strategy. We...

We use stochastic simulation methods to study the efficiency of delta-hedging strategies for ordinary, look-back, and Asian call options on the Samp;P 500 index. Execution is assumed to take place in either the cash or the futures market. Our results clearly show the inadequacy of delta hedging...

We compare the binomial pricing methods for lookback options developed by Babbs (1992), Hull and White (1993), and Cheuk and Vorst (1994). The Babbs and the Cheuk and Vorst methods are very similar in nature and essentially two applications of the same transformation. The Hull and White method...

This paper incorporates investor preferences for return distributions' higher moments into a Polynomial Goal Programming (PGP) optimisation model. This allows us to solve for multiple competing hedge fund allocation objectives within a mean -variance - skewness - kurtosis framework. Our...

Most previous tests of hedge fund performance have failed to model the exposure of hedge fund returns to systematic non-normality risks, nor have they taken the tactical asset allocation decisions of hedge funds managers into account. This paper shows that failure to account for these features...

Since the publication of our first paper on hedge fund replication in 2005, our FundCreator methodology has met with many positive reactions. There have also been some negative responses though. With investors clearly becoming confused as a result of the amount of disinformation that is being...