We provide a novel explanation to the longstanding puzzle of the “missing bankruptcy filings.” Even though a household with a negative net worth will receive contemporaneous benefit from bankruptcy, there may be greater insurance value from delaying the filing. Household bankruptcy is thus...

I perform a regression analysis to test two of the most famous heuristic rules existing in the literature about the behavior of the implied volatility surface. These rules are the sticky delta rule and the sticky strike rule. I present a new specification to test the sticky strike rule, which...

This paper uses data on currency options prices for the exchange rates of the three largest new EU member states Poland, Czech Republic and Hungary vis-à-vis the euro and the US dollar to estimate the risk-neutral density (RND) functions and the density interval bands. Analysing the RNDs, we...

Over-the-counter foreign exchange options (OTC-FXOs) are the fourth largest derivatives market in the world. However, the extant literature on their pricing is noticeably thin. We propose a new discrete time exponential-affine multi-factor model, with multiple estimation strategies and pricing...

This paper uses data on currency options prices for the exchange rates of the three largest new EU member states Poland, Czech Republic and Hungary vis-a-vis the euro and the US dollar to estimate the risk-neutral density (RND) functions and the density interval bands. Analysing the RNDs, we...

The financial crisis has highlighted the need for models that can identify counterparty risk exposures and shock transmission processes at the systemic level. We use the euro area financial accounts (flow of funds) data to construct a sector-level network of bilateral balance sheet exposures and...

We consider an irreversible investment in a project, which generates cash flow following a double exponential jump-diffusion process and its expected return is governed by a continuous-time two-state Markov chain. If the expected return is observable, we present explicit expressions for the...