We derive analytic valuation formulas for range accrual notes and spread range accrual notes under an affine term structure model with jump risks. We show that the value of a range accrual note can be significantly affected by the choice of interest rate model and the arrival intensity of jump...

This paper studies the impact of heterogeneity in interdependence of trader values on price inference and welfare. A model of double auction with quasilinear-quadratic utilities is introduced that allows for arbitrary Gaussian information structures. With heterogeneous interdependence, some...

Most assets clear independently rather than jointly. This paper presents a model based on the uniform‐price double auction which accommodates arbitrary restrictions on market clearing, including independent clearing across assets (allowed when demand for each asset is contingent only on the...

In this paper, we provide an analytic valuation method for European-type contingent claims written on multiple assets in a stochastic market environment. We employ a two-state Markov regime-switching volatility in order to reflect the stochastically-changing market condition. The method is...

We derive analytic valuation formulas for range accrual notes and spread range accrual notes under an affine term structure model with jump risks. We show that the value of a range accrual note can be significantly affected by the choice of interest rate model and the arrival intensity of jump...

Using a search-based trading model, we show that either an illiquidity price premium or discount can arise between two assets with identical fundamentals. Liquidity between the two assets diverges endogenously in a self-reinforcing manner as trading is concentrated in the more liquid asset. When...

We develop a structural model that incorporates both macroeconomic risks and firm-specific jump risks. Using this model, we derive analytic formulas for default probability, equity price, and CDS spreads. We show that including the two types of risk in credit risk modeling can generate better...