The capital asset pricing model (CAPM) is a widely adopted model in asset pricing theory and portfolio construction because of its intuitive nature. One of its main conclusions is that there exists a global market portfolio that each rational investor should hold in proportion with the risk-free...

This note demonstrates how a covariance matrix estimated using log-returns of multiple assets in their respective base currencies can be converted directly into a covariance matrix in a single common currency using basic matrix multiplication. This approach eliminates the need to compute returns...

This paper proposes new bounds on the prices of European-style swaptions for affine and quadratic interest rate models. These bounds are computable whenever the joint characteristic function of the state variables is known. In particular, our lower bound involves the computation of a one...

In this paper we investigate the contribution of structured bonds to the efficient frontier. We conduct our analysis by simulating the term structure according to a no-arbitrage multifactor model (G2 ) and comparing the performance of basic products (like zero-coupon bond, coupon bond and...

In this paper we investigate the use of finite difference and finite element schemes when applied to the valuation of exotic options characterized by discontinuities in the payoff function. In particular, we will conduct a numerical analysis of several common schemes in order to give a better...

We derive a closed-form formula for the fair value of call and put options written on the arithmetic average of security prices driven by jump diffusion processes displaying (possibly periodical) trend, time varying volatility, and mean reversion. The model allows one for jointly fitting quoted...