The replication of any European contingent claim by a static portfolio of calls and puts with strikes forming a continuum, formally proven by Carr and Madan (1998), extends to "standard dispersion" options written on the Euclidean norm of a vector of n asset performances. With the help of...

This paper considers a stochastic control problem derived from a model for pairs trading under incomplete information. We decompose an individual asset's drift into two parts: an industry drift plus some additional stochasticity. The extra stochasticity may be unobserved, which means the...

The replication of any European contingent claim by a static portfolio of calls and puts with strikes forming a continuum, formally proven by Carr and Madan (1998), is part of the more general theory of integral equations. We apply spectral decomposition techniques to show that replication may...

In the run-up to the ex-dividend day a measure based on option implied dividends predicts ex-day abnormal stock returns. These expected ex-dividend day returns increase on stocks where it is less worthwhile to capture the dividend, stocks that are less liquid, stocks with high idiosyncratic...