This note tests the assumption of dynamic discrete choice models that underlying utility shocks have an extreme value type I distribution. We find that extreme value type I shocks cannot be rejected in most specifications of the Rust (1987) bus engine replacement model.

The construction of a set of simultaneous confidence intervals for any finite number of contrasts of p generally correlated normal means is considered. It is shown that the simultaneous confidence level can be expressed as a (p−2)-dimensional integral for a general p≥3. This expression...

This paper is the first to study the hedging of price risk with uncertain payment dates, a frequent problem in practice. It derives a variance-minimizing hedging strategy for two settings, the first employing linear contracts with different times to maturity and the second allowing for...

This paper is the first to study the hedging of price risk with uncertain payment dates, a frequent problem in practice. It derives a variance-minimizing hedging strategy for two settings, the first employing linear contracts with different times to maturity and the second allowing for...

We derive a closed-form expression for the stock price density under the modified SABR model [see section 2.4 in Islah (2009)] with zero correlation, for β = 1 and β 1, using the known density for the Brownian exponential functional for μ = 0 given in Matsumoto and Yor (2005), and then...

This paper discusses the pricing of geometric Asian options when the underlying stock follows the constant elasticity of variance (CEV) process. We build a binomial tree method to estimate the CEV process and use it to price geometric Asian options. We find that the binomial tree method for the...

We apply a singular perturbation analysis to some option pricing models. To illustrate the technique we first consider the European put option under the standard Black-Scholes model, with or without barriers. Then we consider the same option under the constant elasticity of variance (CEV)...