We develop approximate formulae expressed in terms of elementary functions for the density, the price and the Greeks of path dependent options of Asian style, in a general local volatility model. An algorithm for computing higher order approximations is provided. The proof is based on a heat...

Over and over again, history shows that countries default on external debt when their economies experience a downturn. This paper presents a theoretical model of international lending that is consistent with this evidence. Productivity is stochastic and international capital markets are...

A striking feature of sovereign lending is that many countries with moderate debt-to-income ratios systematically face higher spreads and more stringent borrowing constraints than others with far higher debt ratios. Earlier research has rationalized the phenomenon in terms of sovereign...

Policy prescriptions for managing natural resource windfalls are based on the permanent income hypothesis: none of the windfall is invested at home and saving in an intergenerational SWF is dictated by smoothing consumption across different generations. Furthermore, with Dutch disease effects...

In turbulent and volatile markets options can be a preferred asset class for protection against adverse market movements. When volatility increases and markets become sparsely traded, it is not always effective to hedge adverse market movements using any option. Options, where the underlying is...

Asian VaR and coherent Asian Expected Shortfall are an improvement over current methods, measuring more accurately financial portfolio market and liquidity risks. Risk to LIQUIDATION</I> means every day a portion of portfolio assets-i (i = 1 to H_i) is unwound; thus the final unwind price is the sum...

This study compares the efficacy of Black–Scholes implied volatility (BSIV) with model-free implied volatility (MFIV) in providing volatility forecasts for 13 North American, European, and Asian stock market indexes: S&P 500 (United States), S&P/ASX 200 (Australia), S&P/TSX 60 (Canada), AEX...

In this paper, we are concerned with the Monte Carlo valuation of discretely sampled arithmetic and geometric average options in the Black-Scholes model and the stochastic volatility model of Heston in high volatility environments. To this end, we examine the limits and convergence rates of...