We study European options on the ratio of the stock price to its average and viceversa. Some of these options are traded in the Australian Stock Exchange since 1992, thus we call them Australian Asian options. For geometric averages, we obtain closed-form expressions for option prices. For...

This paper reformulates the stochastic string model of Santa-Clara and Sornette (2001) using stochastic calculus with continuous semimartingales. We present some new results, such as: a) the dynamics of the short-term interest rate, b) the PDE that must be satisfied by the bond price, and c) an...

We develop a Gaussian stochastic string model that provides closed-form expressions for the prices of caps and swaptions that, under certain conditions, reduce to Black (1976) formulas. We also propose a stochastic string LIBOR market model that generalizes the models of Brace et al. (1997) and...

We propose a valuation framework for pricing European call warrants on the issuer's own stock that allows for debt in the issuer firm. In contrast to other works which also price warrants with dilution issued by levered firms, ours uses only observable variables. We extend the models of both...

We present the stochastic string model of Santa-Clara and Sornette (2001), as reformulated by Bueno-Guerrero et al. (2014), as a unifying theory of the continuous-time modeling of the term structure of interest rates. We provide several new results, such as: a) an orthogonality condition for the...

We study bond market completeness under infinite-dimensional models and show that, with stochastic string models, the market is complete if we consider strategies as generalized functions. We also obtain completeness for infinite-dimensional HJM models within the stochastic string framework....

In this study, one of the simplifying assumptions of the McConnell and Schwartz (1986) LYON pricing model is relaxed. We present a valuation model that incorporates stochastic interest rates. LYON prices are computed with the modified explicit finite differences method of Hull and White (1990)...

This paper analyses the robustness of Least - Squares Monte Carlo, a technique proposed by Longstaff and Schwartz (2001) for pricing American options. This method is based on least - squares regressions in which the explanatory variables are certain polynomial functions. We analyze the impact of...

We study European options on the ratio of the stock price to its average and vice versa. Some of these options are traded in the Australian Stock Exchange since 1992, thus we call them Australian options. For geometric averages, we obtain closed-form expressions for option prices. For arithmetic...

We study the fitting of the euro yield curve with the Longstaff and Schwartz (1992) (LS) two - factor general equilibrium model and the Schaefer and Schwartz (1984) (SS) two-factor arbitrage model of the term structure of interest rates. The Cox, Ingersoll, and Ross (1985b) (CIR) one-factor...