In this article, I incorporate the anchoring-and-adjustment heuristic into the Black-Scholes option pricing framework, and show that this is equivalent to replacing the risk-free rate with a higher interest rate. I show that the price from such a behavioralized version of the Black-Scholes model...

Summarizing option surfaces using parametric representations, their movements are decomposed into a number of effects. Arguments are presented for treating traditional sensitivity attribution terms as regression factors leading to significant attribution improvements

In this paper we develop a model of corporate bonds pricing. We begin with default definition which is similar to one that is used in the standard reduced form of default model. The primary distinction between our model and reduced form of default model is interpretation of the date-t price of...

Covered bonds have emerged as a potential funding vehicle from the credit crisis. However, there is no detailed examination of how covered bonds should be priced taking into account the features that make them attractive to investors: i.e. over-collateralization of the reference pool and...

Contingent Convertible Bonds, or CoCos, are contingent capital instruments which are converted into shares, or may suffer a principal write-down, if certain trigger event occurs. In this paper we discuss some approaches to the problem of pricing CoCos when its conversion and the other relevant...

We exploit a unique sample of structured financial products (SFPs) to analyze pricing and issuance dependencies among different types of such market-linked investment vehicles. Our study provides evidence of cross pricing between products with complementary payoff profiles. Such dependencies may...

We devise simulation/regression numerical schemes for pricing the CVA on CDO tranches, where CVA stands for Credit Valuation Adjustment, or price correction accounting for the defaultability of a counterparty in an OTC derivatives transaction. This is done in the setup of a continuous-time...

Investment behaviour, techniques and choices have evolved in the options markets since the launch of options trading in 1973. Today, we are entering the field of Big Data and the explosion of information, which has become the main feature of science, impacts investors' decisions and their...