hedging in the presence of large volatility shocks. … pricing model. Implied volatility smiles appear to be explained by the negative asymmetry of the filtered historical … innovations. A new simplified delta hedging scheme is presented based on conditions usually foundin option markets, namely the …

from a given set defined by the parametric volatility specification and the structure of a continuous time Markov chain that … modulates the volatility function. The first stochastic volatility specification generates jump discontinuities in volatility and … shape-preserving evolution of the volatility term structure in thefuture. The second specification allows, in addition, for …

also closelyrelated to tangibility of assets and the volatility of a firm’s earnings. Fi-nally, estimating a dynamic panel …

admissible sets of for-ward swap rates spanning a given tenor structure. We relate this conceptto results in graph theory by … argue that the co-terminal approach is the simplest andmost convenient market mo del for pricing and hedging a large variety …

difference (spread) between the two-period CMS swap rates calcu-lated by convexity adjustment and Forward Libor Model. The spread … 0.8750 and 0.7939, respectively. Moreover,convexity adjustment yields CMS swap rates higher than Forward Libor Modeldoes …. Since the pricing using Forward Libor Model would be exact, we concludethat the convexity adjustment overestimates CMS swap …

. Yet, default swap market has severalnovel aspects that have not received much attention. In this paper we studyan aspect …