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After the fall of apartheid in South Africa, Black Economic Empowerment emerged as a central policy, aimed at redressing the imbalances of the past by fairly transferring financial and economic resources to the majority of its citizens. Corporations voluntarily conduct Black Economic Empowerment...
Persistent link: https://www.econbiz.de/10012897351
We provide an efficient swaption volatility approximation for longer maturities and tenors, under the lognormal forward-LIBOR model. In particular, we approximate the swaption volatility with a mean update of the spanning forward rates. Since the joint distribution of the forward rates is not...
Persistent link: https://www.econbiz.de/10012901887
We investigate the equilibrium interest rate charges on non-recourse and recourse loans secured by stock. In such loans, the client retains the option to prepay and recover the collateral stock. We adopt a structural model of the firm where debt levels, with endogenous bankruptcy, affect equity...
Persistent link: https://www.econbiz.de/10013292845
We develop a structural model of the firm that allows after-interest cash to be directed to dividends, buybacks or some combination thereof. We study the effects of dilutions and buybacks on the value of the firm's claimants and on options written on the stock. We distinguish between options on...
Persistent link: https://www.econbiz.de/10012866309
This paper provides a methodology for fast and accurate pricing of the long-dated contracts that arise as the building blocks of insurance and pension fund agreements. It applies the recursive marginal quantization (RMQ) and joint recursive marginal quantization (JRMQ) algorithms outside the...
Persistent link: https://www.econbiz.de/10012929571
This document serves as the online appendix to McWalter et al. [2017]. It provides efficient matrix implementations for both vector quantization and the generalized recursive marginal quantization, which allows for the implementation of the higher-order discretization schemes presented in the...
Persistent link: https://www.econbiz.de/10012932079
We present an algorithm to approximate moments for forward rates under a displaced lognormal forward-LIBOR model (DLFM). Since the joint distribution of rates is unknown, we use a multi-dimensional full weak order 2.0 Ito-Taylor expansion in combination with a second-order Delta method. This...
Persistent link: https://www.econbiz.de/10012835181
Recursive Marginal Quantization (RMQ) allows fast approximation of solutions to stochastic differential equations in one-dimension. When applied to two factor models, RMQ is inefficient due to the fact that the optimization problem is usually performed using stochastic methods, e.g., Lloyd's...
Persistent link: https://www.econbiz.de/10012958197
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Persistent link: https://www.econbiz.de/10004945416