This paper introduces a new macro-financial continuous-time model for the term structure of interest rates assuming that the instantaneous interest rate converges to a certain long-term mean level that depends on the business cycle. In short, our new model assumes that this mean reversion level...

This paper develops a new macro-financial continuous-time model for the term structure of interest rates assuming that the instantaneous interest rate converges to a certain long-term mean level that depends on the business cycle and that the interest rate volatility depends on the interest rate...

In this paper we develop a novel valuation model and methodology to value a pharmaceutical R&D project based on real options approach. The real options approach enables the possibility of optimally abandon the project before completion whenever the investment cost turns out to be larger than the...

This paper introduces a continuous-time model for commodity pricing under the assumption that logged prices converge to a mean level that experiences smooth, periodic fluctuations over long periods of time. Our model incorporates that assumption by modelling the mean reversion level through a...

Stock and option markets can at times reflect differing information. We identify three reasons for the presence of these periods of 'disagreement' between the cash and derivatives markets: 1) high volatility and noise trading; 2) high level of risk aversion; 3) speculation versus hedging trades....

We examine the dynamic trading strategies implemented by hedge fund managers using a Kalman filter. We investigate the risk drivers of dynamic trades, examining which macroeconomic variables strongly lead the time variation in fund trades. We show that hedge funds control the intensity of their...