It has been long recognized that endogenous default probabilities cannot explain spreads between corporate and the riskless bonds. Recently, this issue has been subjected to rigorous scrutiny. Previous studies have found that for investment-grade debt, structural models explain only 15-25% of...

I provide a theoretical model for two empirical phenomena observed in the NYSE and Nasdaq markets. First is the bid-ask bounce recently studied by Heston, Korajczuk and Sadka (HKS, 2008) for high-frequency data. Second is a temporary liquidity squeeze observed by Madureira and Underwood (2008)...

An ability to postpone one's execution without penalty provides an important strategic advantage in high-frequency trading. To elucidate competition between traders one has to formulate to a quantitative theory of formation of the execution price from market expectations and quotes. This theory...

I provide a theoretical model for two empirical phenomena observed in the NYSE and Nasdaq markets. First is the bid-ask bounce recently studied by Heston, Korajczuk and Sadka (HKS, 2008) for high-frequency data. Second is a temporary liquidity squeeze observed by Madureira and Underwood (2008)...

The manipulation of the LIBOR by a group of banks became one of the major blows to the remaining confidence in the finance industry (e.g. Department of Justice, 2012). Yet, despite an enormous amount of popular literature on the subject, rigorous time-series studies are few. In my paper, I...

This is a teaching case related to the financial valuation of Boeing Co. based on 2011-2015 corporate reports. The case highlights serious anomaly with the Boeing Co. balance sheet in the period 2013-2015. Sample valuation projections for the Boeing stock for the period 2016-2019 are provided...

The method of the Wigner-Ville function proposed by Wigner, (1932) and Ville (1947) is widely used in quantum statistical mechanics and signal processing and historically preceded the continuous-time wavelets. (Gabor, 1946) Here it is proposed for the studies of the financial time series. One of...

In 2008, Epstein and Schneider formulated a microstructure-inspired theory in which one could determine price volatility through a number of other market parameters such as asset volatility, risk free rate and dividend rate. A particular feature of the Epstein-Schneider theory is an extremely...

Copulas are widely used in financial economics (Brigo 2010) as well as in other areas of applied mathematics. Yet, there is much arbitrariness in their choice. The author proposes “a natural copula” concept, which minimizes Wasserstein distance between distributions in some space, in which...