Options on stocks are priced using information on index options and viewing stocks in a factor model as indirectly holding index risk. The method is particularly suited to developing quotations on stock options when these markets are relatively illiquid and one has a liquid index options market...

Option prices provide valuable information on market expectations. This paper attempts to extract market expectations, as conveyed by an implied risk-neutral probability distribution, from option prices for the dollar-euro exchange rate. Returns' volatilities are inferred from observed and...

There has been an on-going debate about choices of the most suitable model amongst avariety of model specifications and parameterizations. The first dissertation essay investigateswhether asymmetric leptokurtic return distributions such as Hansen’s (1994) skewed tdistributioncombined with...

As is well known, the classic Black-Scholes option pricing model assumes that returns follow Brownian motion. It is widely recognized that return processes differ from this benchmark in at least three important ways. First, asset prices jump, leading to non-normal return innovations. Second,...

As is well known, the classic Black­Scholes option pricing model assumes that returns follow Brownian motion. It is widely recognized that return processes differ from this benchmark in at least three important ways. First, asset prices jump, leading to non­normal return innovations. Second,...

In this paper, we use the Markov chain censoring technique to study infinite state Markov chains whose transition matrices possess block-repeating entries. We demonstrate that a number of important probabilistic measures are invariant under censoring. Informally speaking, these measures involve...