In this study, we consider the pricing of energy derivatives when the evolution of spot prices follows a tempered stable or a CGMY-driven Ornstein-Uhlenbeck process. To this end, we first calculate the characteristic function of the transition law of such processes in closed form. This result is...

The current paper examines the maturity effect which states that “the futures prices volatility increases as the futures contract approaches its maturity period”. As per maturity effect theory, when a contract approaches its delivery date, the flow of information affects the prices. The...

This paper investigates how interbank credit exposures affect financial stability. Policy makers often see such exposures as undermining stability by exacerbating cascading losses through the financial system. I develop a model that features a trade-off between cascading losses and risk-sharing....

We analyze how informed investors trade in the options market ahead of corporate news when they receive private, but noisy, information about the timing and impact of these announcements on stock prices. We propose a framework that ranks options trading strategies (option type, maturity, and...

Cryptocurrencies provide a unique opportunity to identify how derivatives impact spot markets. They are fully fungible, trade across multiple spot exchanges at different prices, and futures contracts were selectively introduced on bitcoin (BTC) exchange rates against the USD in December 2017....