The volatility information content of stock options for individual firms is measured using option prices for 149 U.S. firms and the S&P 100 index. ARCH and regression models are used to compare volatility forecasts defined by historical stock returns, at-the-money implied volatilities and...

We investigate the association of various firm-specific and market-wide factors with the riskneutral skewness (RNS) implied by the prices of individual stock options. Our analysis covers 149 U.S. firms over a four-year period. Our choice of firms is based on adequate liquidity and trading...

This paper provides a strategy for portfolio risk management by inferring extreme movements in financial markets. The core of the provided strategy is a statistical model for the joint tail distribution that attempts to capture accurately the data generating process through an extremal modelling...

We present an application of importance sampling in a Monte Carlo simulation for multi-asset options and in a Multi-Level Monte Carlo simulation. We demonstrate that applying importance sampling only on the first level of the Multi-Level Monte Carlo significantly improves its effective...

Using the joint characteristic function of equity price and state variables, we can price contingent claims on both equity and VIX consistently. Based on linear approximation of jump size, we show that one factor models implies all VIX future contract of different maturities are perfectly...

During the financial crisis in 2007-8, the quoted spread for the average S&P 1500 firm increased by 50%, while the systematic liquidity risk increased by 34%. We find that the trading of a firm's equity by institutional investors increased the firms' quoted spreads, and led to a higher liquidity...

We introduce a stochastic volatility model with self-exciting jump intensity to capture the change in pricing dynamic triggered by big negative stock returns. The stochastic variance and jump intensity, and their risk premium are estimated jointly from daily stock returns and option data over...

In this paper we analyze the source and magnitude of marketing gains from selling structured debt securities at yields that reflect only their credit ratings, or specifically at yields on equivalently rated corporate bonds. We distinguish between credit ratings that are based on probabilities of...

The purpose of this paper is to apply a belief rule-based (BRB) system to solve the multiasset class portfolio optimisation problems. The BRB system, was developed on the basis of the concept of belief structures and the evidential reasoning (ER) approach, is a generic non-linear modelling and...

This paper compares the pricing and hedging performance of the LMM model against two spot-rate models, namely Hull-White and Black-Karasinski, and the more recent Swap Market Model from an Asset-Liability-Management (ALM) perspective. In contrast to previous studies in the literature, our...