Commodity derivatives are becoming an increasingly important part of the global derivatives market. Here we develop a tractable stochastic volatility model for pricing commodity derivatives. The model features unspanned stochastic volatility, quasi-analytical prices of options on futures...

We develop a tractable and flexible stochastic volatility multifactor model of the term structure of interest rates. It features unspanned stochastic volatility factors, correlation between innovations to forward rates and their volatilities, quasi-analytical prices of zero-coupon bond options,...

This paper investigates variance risk premia in energy commodities, particularly crude oil and natural gas, using a robust model-independent approach. Over a period of 11 years, we find that the average variance risk premia are negative for both energy commodities. Energy variance risk premia in...

We develop a tractable and flexible stochastic volatility multi-factor model of the term structure of interest rates. It features unspanned stochastic volatility factors, correlation between innovations to forward rates and their volatilities, quasi-analytical prices of zero-coupon bond options,...

In this article we develop a model to analyze patent-protected Ramp;D investment projects when there is (imperfect) competition in the development and marketing of the resulting product. The competitive interactions that occur substantially complicate the solution of the problem since the...

We develop a real options model of Ramp;D valuation that takes into account the uncertainty in the quality (or efficacy) of the research output, the time and cost to completion, and the market demand for the Ramp;D output. The model is then applied to study the problem of pharmaceutical...

The presence of illiquid assets, such as human wealth or a family owned business, complicates the problem of portfolio choice. This paper is concerned with the problem of optimal asset allocation and consumption in a continuous time model when one asset cannot be traded. This illiquid asset,...

This article develops and implements a simulation approach to value patents and patent-protected Ramp;D projects based on the Real Options approach. It takes into account uncertainty in the cost-to-completion of the project, uncertainty in the cash flows to be generated from the project, and the...

Personal preferences and financial incentives make homeownership desirable for most families. Once a home is purchased they find it impractical (costly) to frequently change their ownership of residential real estate. Thus, by deciding how much home to buy, a family constrains their ability to...