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Londoño, Jaime - EconWPA - 2005

An extension of the idea of state tameness is presented in a dynamic framework. The proposed model for financial markets is rich enough to provide analytical tools that are mostly obtained in models that arise as the solution of SDEs with deterministic coefficients. In the presented model the...

Persistent link: https://www.econbiz.de/10005134649

Electrodynamical model of quasi-efficient financial market

Ilinski, Kirill; Stepanenko, Alexander - EconWPA - 1998

The modelling of financial markets presents a problem which is both theoretically challenging and practically important. The theoretical aspects concern the issue of market efficiency which may even have political implications, whilst the practical side of the problem has clear relevance to...

Persistent link: https://www.econbiz.de/10005561574

Stock Valuation and Investment Strategies

Chen, Zhiwu; Dong, Ming - EconWPA - 2004

This article studies the relative investment performance of several stock-valuation measures. The first is mispricing based on the valuation model developed by Bakshe and Chen (1998)and extended by Dong (1998) (hereafter, the BCD model). The BCD model relates, in closed form, a stock's fair...

Persistent link: https://www.econbiz.de/10005561689

A Generalized Earnings-Based Stock Valuation Model

Dong, Ming; Hirshleifer, David - EconWPA - 2004

This paper provides a model for valuing stocks that takes into account the stochastic processes for earnings and interest rates. Our analysis differs from past research of this type in being applicable to stocks that have a positive probability of zero or negative earnings. By avoiding the...

Persistent link: https://www.econbiz.de/10005561702

Time-Changed Levy Processes and Option Pricing

Carr, Peter; Wu, Liuren - EconWPA - 2002

As is well known, the classic BlackScholes option pricing model assumes that returns follow Brownian motion. It is widely recognized that return processes differ from this benchmark in at least three important ways. First, asset prices jump, leading to nonnormal return innovations. Second,...

Persistent link: https://www.econbiz.de/10005134892

Variance Risk Premia

Carr, Peter; Wu, Liuren - EconWPA - 2004

We propose a direct and robust method for quantifying the variance risk premium on financial assets. We theoretically and numerically show that the risk-neutral expected value of the return variance, also known as the variance swap rate, is well approximated by the value of a particular...

Persistent link: https://www.econbiz.de/10005413197

State Tameness: A New Approach for Credit Constrains

Londoño, Jaime A. - EconWPA - 2003

give a new definition for arbitrage and characterize it. We then prove a theorem that can be seen as an extension of the …

Persistent link: https://www.econbiz.de/10005413227

Mispricing and Lasting Arbitrage between Parallel Markets in the Czech Republic

Hanousek, Jan; Nemecek, Libor - EconWPA - 2001

If co-existing parallel markets are efficient, then arbitrage will maintain a correct pricing relationship. A related … (with transaction costs), in which price differences are studied using levels of arbitrage activity. For the empirical …-the-counter system). In particular, we study the degree of arbitrage activity for different segments of the PSE and the evolution of …

Persistent link: https://www.econbiz.de/10005077009

What Constitutes a Good Model? An Analysis of Models for Mortgage Backed Securities

Heidari, Massoud; Wu, Liuren - EconWPA - 2004

The U.S. agency mortgage backed securities (MBS) market is deep and highly liquid, yet modeling MBS is extremely challenging. This paper applies market participants' desired requirements for a good pricing model to MBS pricing models provided by six of the top MBS dealers. We find that five out...

Persistent link: https://www.econbiz.de/10005561622

Competition among Alternative Option Market Structures: Evidence from Eurex vs. Euwax

Bartram, Sohnke M.; Fehle, Frank R. - EconWPA - 2003

We study option market design by providing a theoretical motivation and comprehensive empirical analysis of two fundamentally different option market structures, the Eurex derivatives exchange and Euwax, the world’s largest market for bank-issued options. These markets exist side-by- side,...

Persistent link: https://www.econbiz.de/10005134941

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