In this paper we develop an arbitrage-free model for the pricing of commodity derivatives. The model generates futures (or forward) commodity prices consistent with any initial term structure. The model is consistent with mean reversion in commodity prices and also generates stochastic...

We study the asymmetric and dynamic dependence between financial assets and demonstrate, from the perspective of risk management, the economic significance of dynamic copula models. First, we construct stock and currency portfolios sorted on different characteristics (ex ante beta, coskewness,...

We examine the optimal hedging of derivatives written on realised variance, focussing principally on variance swaps (VS) (but, en route, also considering skewness swaps), when the underlying stock price has discontinuous sample paths, i.e. jumps. In general, with jumps in the underlying, the...

The eight years from 2000 to 2008 saw a rapid growth in the use of securitization by UK banks. We aim to identify the reasons that contributed to this rapid growth. The time period (2000 to 2010) covered by our study is noteworthy as it covers the pre-financial crisis credit- boom, the peak of...

Faced with the problem of pricing complex contingent claims, an investor seeks to make his valuations robust to model uncertainty. We construct a notion of a model- uncertainty-induced utility function and show that model uncertainty increases the investor's effective risk aversion. Using the...

Faced with the problem of pricing complex contingent claims, investors seek to make their valuations robust to model uncertainty. We construct a notion of a model-uncertainty-induced utility function and show that model uncertainty increases investors’ effective risk aversion. Using this...

We examine how to approximate a Lévy process by a hyperexponential jump-diffusion (HEJD) process, composed of Brownian motion and of an arbitrary number of sums of compound Poisson processes with double exponentially distributed jumps. This approximation will facilitate the pricing of exotic...

In a recent paper, Crosby introduced a multi-factor jump-diffusion model which would allow futures (or forward) commodity prices to be modelled in a way which captured empirically observed features of the commodity and commodity options markets. However, the model focused on modelling a single...

The eight years from 2000 to 2008 saw a rapid growth in the use of securitization by UK banks. We aim to identify the reasons that contributed to this rapid growth. The time period (2000 to 2010) covered by our study is noteworthy as it covers the pre- financial crisis credit-boom, the peak of...