This paper values interest rate options using an improved parametric pricing kernel in the Merton (1973) intertemporal capital asset pricing model framework. The pricing kernel is driven by the real interest rate, the Jensen's alpha, and the market volatility. Parameters in the pricing kernel...

This paper examines empirically the value of early exercise by testing the ability of two American put valuation models to predict the early exercise premium for the S&P100 American put options. An accuracy test and a quality test are performed on (1) the MacMillan (1986) & Barone-Adesi and...

In this empirical study, I investigate whether emerging market stock prices can deviate from their fundamental values. Because standard tests are subject to size distortion, a new robust test due to Taylor and Peel (1998) is used here to test periodically collapsing emerging market stock price...

The sharp increase in U.S. interest rates that began in the late 1970's and early 1980's as well as in October 1993 focused increased attention on interest rate risk, especially in mortgage backed and derivative securities. more than ever, life insurance companies need to control interest rate...

We investigate the effects of stochastic interest rates and jumps in the spot exchange rate on the pricing of currency futures, forward and futures options. The proposed model extends Bates's model by allowing both the domestic and foreign interest rates to move around randomly, in a generalized...