The reputation of an individual is the aggregate opinion of them. Reputation is usually explained by attributes of the one reputed, not the motivation of those doing the reputing. In this paper, we develop a model of reputation where the opinions are assets that leverage the reputation of...

This paper constructs a new theory of social networks based on the options individuals buy on each other. The model assumes that when an individual connects with another it is equivalent to buying options on the other's reputation. The option model confers advantages not present in existing...

We develop a new approach to approximating asset prices in the context of continuous-time models. For any pricing model that lacks a closed-form solution, we provide a closed-form approximate solution, which relies on the expansion of the intractable model around an “auxiliary” one. We...

In a two-period setup we develop a generalization of good-deal bounds that allows to include in the problem the implications of asset pricing models. Our basis is the distance behind Hansen and Jagannathan's measure of model misspecification since a volatility constraint on the stochastic...

Risk neutral densities (RND) can be used to forecast the price of the underlying basis for the option, or it may be used to price other derivates based on the same sequence. The method adopted in this paper to calculate the RND is to firts estimate daily the diffusion process of the underlying...

Probability density function (pdf) for (weighted) sum of n correlated lognormal variables is deducted. The method uses joint pdf of multivariate correlated lognormal variables and an extended method of convolution. The formula contains (n-1)-fold integral, which can be evaluated by numerical...

We propose an iterative method for pricing American options under jump-diffusion models. A finite difference discretization is performed on the partial integro-differential equation, and the American option pricing problem is formulated as a linear complementarity problem (LCP). Jump-diffusion...