The behavioral finance literature cites the frozen concentrated orange juice (FCOJ) futures market as a prominent example of the failure of prices to reflect fundamentals.(...)

This paper provides an analytical solution to the problem of how an institution might optimally manage the market risk of a given exposure, under the assumption that the institution wishes to minimize its Value at Risk (VaR) using options. The solution specifies the VaR-minimizing level of...

This paper presents a general, nonlinear version of existing multifactor models, such as Longstaff and Schwartz (1992). The novel aspect of our approach is that rather than choosing the model parameterization out of thin air,' our processes are generated from the data using approximation methods...

We investigate the relation between returns on stock indices and their corresponding futures contracts to evaluate potential explanations for the pervasive yet anomalous evidence of positive, short-horizon portfolio autocorrelations. Using a simple theoretical framework, we generate empirical...

This article provides an analytical solution to the problem of an institution optimally managing the market risk of a given exposure by minimizing its Value-at-Risk using options. The optimal hedge consists of a position in a single option whose strike price is independent of the level of...