The Black-Scholes formula is often used in the backward direction to invert the implied volatility, usually with some solver method. Solver methods, being aesthetically unappealing, are also slower than closed-form approximations. However, closed-form approximations in previous works lack...

Fuzzy time series has been applied to forecast various domain problems because of its capability to deal with vagueness and incompleteness inherent in data. However, most existing fuzzy time series models cannot cope with multi-attribute time series and remain too subjective in the partition of...

Research in both economics and psychology suggests that, when agents predict the next value of a random series, they frequently exhibit two types of biases, which are called the gambler’s fallacy (GF) and the hot hand fallacy (HHF). The gambler’s fallacy is to expect a negative...

A new estimator of bid-ask spreads is presented. When the trade direction is known, any estimate of the spread is associated with a unique series of conjectural mid-prices derived by adjusting the observed transaction price by half the estimated spread. It is shown that the covariance of...

The performance of bid-ask spread estimators is investigated using simulation experiments. All estimators are much more accurate if the data are sampled at high frequency. In high-frequency data, the Huang-Stoll estimator, which requires order flow information, generally outperforms Roll-type...

Bankruptcy prediction is a key part in corporate credit risk management. Traditional bankruptcy prediction models employ financial ratios or market prices to predict bankruptcy or financial distress prior to its occurrence. We investigate the predictive accuracy of corporate efficiency measures...

In this paper, we modify the Huang and Stoll (1997) spread-decomposing model to fit multi-dealer markets. In a multi-dealer market, individual dealers can rebalance their inventories either by trading with other dealers or changing the quote price. Our modified model captures this feature. Using...

We develop an asymptotic expansion technique for pricing timer options under general stochastic volatility models around small volatility of variance. Closed-form approximation formulas have been obtained for the Heston model and the 3/2-model. The approximation has an easy-to-understand...

We study Aumann and Serrano's (2008) risk index for sums of gambles that are not necessarily independent. We show that if the dependent parts of two gambles are similarly ordered, or more generally positively quadrant dependent, then the risk index of the sum of two gambles is always larger than...