This paper compares two well-known approaches for valuing a risky investment using real options theory: contingent claims (CC) with risk neutral valuation and dynamic programming (DP) using a constant risk adjusted discount rate. Both approaches have been used in valuing forest assets. A proof...

Volatility clustering is a well-known stylized feature of financial asset returns. In this paper, we investigate the asymmetric pattern of volatility clustering on both the stock and foreign exchange rate markets. To this end, we employ copula-based semi-parametric univariate time-series models...

This paper investigates whether convenience yield is an important factor in determining optimal decisions for a forestry investment. The Kalman filter method is used to estimate three different models of lumber prices: a mean reverting model, a simple geometric Brownian motion and the two-factor...

Selecting an estimator for the variance covariance matrix is an important step in hypothesis testing. From less robust to more robust, the available choices include: Eicker/White heteroskedasticity-robust standard errors, Newey and West heteroskedasticity-and-autocorrelation- robust standard...

In this paper, we study the prices of the options on Hong Kong's linked exchange rate. The study was motivated by the apparent contradiction that options with strike prices outside the narrow trading band have positive prices. We developed a simple regime-switching model of the exchange rate and...

We develop a model of portfolio choice to nest the views of Keynes---who advocates concentration in a few familiar assets---and Markowitz---who advocates diversification across assets. We rely on the concepts of ambiguity and ambiguity aversion to formalize the idea of investor's...

We develop a model of portfolio choice capable of nesting the views of Keynes, advocating concentration in a few familiar assets, and Markowitz, advocating diversification across all available assets. In the model, the return distributions of risky assets are ambiguous, and investors are averse...