In this paper, we extend the Merton's structured approach to incomplete market economy, in which investors may have irrational or distorted belief about the corporate's future cash flow. Our theoretical model implies irrational belief generates an additional risk. In detail, as distorted belief...

In this paper, we introduce the concept of multi-stage compound options to the valuation of convertible bonds (CBs). Rather than evaluating a nested high-dimensional integral that has arisen from the valuation of multi-stage compound options, we found that adopting the finite difference method...

This paper deals with the labor supply problem in the contemporaneous presence of wage rate and non-labor income uncertainties. We examine the effect of a stochastic wage rate(a non-labor income uncertainty) on labor supply in the presence of a non-labor income uncertainty(a stochastic wage...

Under the assumption of the movement of rigid, a nonparallel-shift model in the term structure of interest rates is developed by introducing Fisher & Weil duration which is a well-known concept in the area of interest risk management. This paper has studied the hedge and replication for...

This paper proposes a procurement mechanism for a research and development (R&D) project, in which the stochastic nature of R&D is incorporated, and the potential agents needed to invest prior to the agent are selected. The incentive contract aims to attract the investment of potential agents...

To protect the conversion privilege from being called away too soon, the bond indenture commonly contains hard call constraint and soft call constraint, which makes the valuation for the convertible bond more complicated. In this paper, a valuation model for a callable convertible bond with...

To study the house price dynamics in China, this paper extends the traditional life-cycle model by incorporating land supply, regime shifts and government regulation factors. The models are estimated with an error correction framework using quarterly data from 2000 to 2007 in Beijing. The...

In hedonic housing price modeling, real estate researchers and practitioners are often not completely ignorant about the parameters to be estimated. Experience and expertise usually provide them with tacit understanding of the likely values of the true parameters. Under this scenario, the...