This paper examines the prediction performance using a principal component analysis (PCA). In particular, we perform a PCA to identify significant factors (principal components) and then use these factors to form predictions of stock price movements. We apply this strategy to the Chinese stock...

As the energy market has grown in importance in recent decades, researchers have paid increasing attention to swing option contracts. Early studies evaluated the swing contract as if it were a financial derivative contract, by ignoring its storage constraints. Aided by recent advances in...

This thesis extends the previous work on interest rate contingent claims in several ways. First, futures pricing models and futures options pricing models are derived. These models are under the settings of both single state variable and two state variables. The derivations make use of regular...

Prior research uses the basic one-period European call-option pricing model to compute default measures for individual firms and concludes that both the size and book-to-market effects are related to default risk. For example, small firms earn higher return than big firms only if they have...

This paper tests whether the traditional futures hedge ratio (hT) and the carry cost rate futures hedge ratio (hc) vary in accordance with the Sercu and Wu (2000) and Leistikow et al. (2019) "hc" theory. It does so, both within and across high and low spot asset carry cost rate (c) regimes. The...

In this paper, we evaluate American-style, path-dependent derivatives with an artificial intelligence technique. Specifically, we use swarm intelligence to find the optimal exercise boundary for an American-style derivative. Swarm intelligence is particularly efficient (regarding computation and...

Index tracking has long been of interest for both industry of fund management andacademia. Various methods have been proposed and tested and various issues arediscussed throughout the past 30 years. Yet one issue remains unresolved is how toperform stock selection optimally. In this paper, I...

The recent global financial crisis reignited concerns over systemic risk in the financial industry as a new type of systemic risk emerged – the severe loss of asset value due to illiquidity. The crisis has sparked a large body of research and has led to a number of new quantitative indicators...

This paper examines cross-sectional relations between ex ante expected returns and betas. As a proxy for ex ante expected returns, we use implied returns obtained from the risk-adjusted option pricing model suggested in this paper. We find that implied returns have a positive and significant...

A basic requirement for a credit risk model is that it should not imply negative default probabilities. In this paper, we explore the implications of this condition for credit risk modeling. More specifically, we use the condition as a diagnostic tool to investigate if a particular model is...