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We study the extent to which credit index (CDX) options are priced consistent with S&P 500 (SPX) equity index options. We derive analytical expressions for CDX and SPX options within a structural credit-risk model with stochastic volatility and jumps using ...
We study the effects of takeover feasibility on asset prices and returns in a unified framework. We show theoretically that takeover protections increase equity risk, stock returns, and bond yields by removing a valuable put option to sell the firm, notabl ...
We characterize the unique equilibrium in an economy populated by strategic CARA investors who trade multiple risky assets with arbitrarily distributed payoffs. We use our explicit solution to study the joint behavior of illiquidity of option contracts. Op ...
In this article, we account for the liquidity risk in the underlying assets when pricing European exchange options, which has not been considered in the literature. An Ornstein-Uhlenbeck process with the mean -reversion property is selected to model the ma ...
In this thesis we present three closed form approximation methods for portfolio valuation and risk management.The first chapter is titled ``Kernel methods for portfolio valuation and risk management'', and is a joint work with Damir Filipovi'c (SFI and EP ...
This article derives a closed-form pricing formula for European exchange options under a non-Gaussianframework for the underlying assets, intending to resolve mispricing associated with a geometric Brownianmotion. The dynamics of each of the two correlated ...
When activist shareholders file Schedule 13D filings, the average excess return on target stocks is 6% and stock price volatility drops by about 10%. Prior to filing days, volatility (price) information is reflected in option (stock) prices. Using a compre ...
Despite regulatory efforts to promote all-to-all trading, the post-Dodd-Frank index credit default swap market remains two-tiered. Transaction costs are higher for dealer-to-client than interdealer trades, but the difference is explained by the higher, lar ...
In the chapter ``When to Introduce Electronic Trading Platforms in Over-the-Counter Markets?'' An equilibrium in a market is determined in which traders have the choice between using an electronic platform with a request-for-quote protocol or calling a dea ...
Over the last decade, dividends have become a standalone asset class instead of a mere side product of an equity investment. We introduce a framework based on polynomial jump-diffusions to jointly price the term structures of dividends and interest rates. ...