We investigate the impact of credit spreads on the stochastic duration and convexity of corporate bonds with respect to the very metrics for equivalent Treasury bonds. We show that the credit spread has two interacting effects on both the duration and the convexity of a corporate coupon bond as...

We examine the performance of initial public offerings (IPO) using a stochastic dominance approach that captures investors’ preferences for higher moments of the returns distribution. Using a comprehensive sample of 6,671 IPOs in the U.S. from 1980 to 2012, we find no evidence that IPOs...

In this paper, we develop the theory of functional generation of portfolios in an equity market of a changing dimension. By introducing dimensional jumps in the market, as well as jumps in stock capitalization between the dimensional jumps, we construct different types of self-financing stock...

In this short note, we consider the issue of negative intensities when using an Hull-White model. We show how to solve this drawback by slightly modifying the zero-coupon analytical formula available for Gaussian models

We study Asynchronous Stochastic Dynamic Models in which a single agent chooses in each period and examine the existence of Markov-perfect equilibrium in these models. We show that if the models are stochastic then a pure strategy Markov-perfect equilibrium exists for a finite horizon game. For...

This paper experimentally investigates whether decision-makers violations of the first-order stochastic dominance (FSD) criterion of rational choice, as documented in previous studies, are correlated with their risk preferences. As argued in the literature, FSD violations require framing effects...

Most literatures about robust optimal reinsurance-investment problem aim to maximum the value function under the worst-case scenario, but some insurers are optimistic, so it is more reasonable to consider a more smooth criterion named $\alpha$-maxmin criterion which seek a balance between the...

Many sophisticated option pricing models involve random variables whose probability density functions are only tractable in Fourier space. Moreover, popular choices for these variables often lead to numerical challenges, due to, for instance, singular densities or slowly decaying characteristic...

We characterize the extreme points of first-order stochastic dominance (FOSD) intervals and show how these intervals are at the heart of many topics in economics. Using knowledge of these extreme points, we characterize the distributions of posterior quantiles under a given prior, leading to an...

Efficient pricing of American options is important. Many numerical schemes calculate their prices using Bermudan options, and the popular penalty method is equivalent to a randomized Bermudan option scheme. Outside the Black-Scholes setting, very few convergence speed results have been...