Modern economies have been subjected to a number of shocks during the past several years such as the burst of the Internet bubble, terrorist attacks, corporate scandals, the war in Iraq, the uncertainty about energy prices, and the recent subprime mortgage crisis. In particular, during the last...

The North American Free Trade Agreement (NAFTA) - an extension of the Free Trade Agreement (FTA) between Canada and USA to include Mexico - went into effect on January 1, 1994, primarily as an agreement to eliminate restrictions on trade and investment over the course of twelve years. NAFTA is a...

The purpose of this paper is to develop certain relatively recent mathematical discoveries known generally as stochastic calculus, or more specifically as Ito's Calculus and to also illustrate their application in the pricing of options. The mathematical methods of stochastic calculus are...

Since the collapse of the Bretton Woods Global International System in 1971, the world economy has experienced significant currency volatility. The major economies of the world have addressed such volatility differently. The EU has chosen to follow a monetary union and introduced successfully a...

The celebrated Taylor Rule methodology has established that the decisions made by the Federal Open Market Committee concerning possible changes in short term interest rates reflected in Fed Funds are influenced by deviations from a desired level of inflation and from potential output. The Taylor...

Several methods have been developed for filtering seasonal structures and extreme returns in financial and economic series. The theoretical support for this approach is rather questionable since it focuses on the effects of shocks on prices and not on their sources. The non-proportional...

This chapter introduces the reader to the Black-Scholes -Merton model by identifying its assumptions and illustrating its mathematical derivation using intuitive financial reasoning. Numerical examples are also presented to help the reader understand practical aspects of this celebrated model....

This paper considers several important macroeconomic variables such as inflation, Federal funds rates and unemployment along with behavioral variables such as momentum trading to explain excessive U.S. equity returns during the post World War II era. The theoretical hypotheses propose three...

This paper considers several important macroeconomic variables such as inflation, federal funds rates and unemployment along with behavioral variables such as momentum trading to explain excessive U.S. equity returns during the post World War II era. The theoretical hypotheses propose three...

Comovements among asset prices have received a lot of attention for several reasons. For example, comovements are important in cross-hedging and cross-speculation; they determine capital allocation both domestically and in international mean-variance portfolios and also, they are useful in...