Significant deviations from covered interest parity were observed during the financial crisis of 2007-2009. This paper finds that before the failure of Lehman Brothers the market-wide funding liquidity risk was the main determinant of these deviations in terms of the premiums on swap-implied US...

The economic-political instability of a country, which is tied to its credit risk, often leads to sharp depreciation and heightened volatility in its currency. This paper shows that not only the creditworthiness of the euro-area countries with weaker fiscal positions but also that of the member...

The price disparity between the A- and H-share markets for dual-listed firms in China is one of the most intriguing puzzles in the mainland and Hong Kong financial markets. In this paper, we revisit this price disparity puzzle using the channel of parameter uncertainty. In the presence of...

The empirical results show that after the introduction of the three refinements to the Linked Exchange Rate system in May 2005 the Hong Kong dollar follows a bounded process that is consistent with a fully credible exchange rate band. The bounded process will limit the movements of the exchange...

A new Capital Accord (Basel II) proposed by the Basel Committee on Banking Supervision raises the question of how to measure forward credit risk capital charges arising from maturity-mismatched hedges. This article develops a model to measure forward credit risk that is treated as a put option...

The valuation and applications of one-touch double barrier binary options that include features of knock-out, knock-in, European and American style are described. Using a conventional Black-Scholes option-pricing environment, analytical solutions of the options are derived. The relationships...