We present a numerical algorithm for pricing derivatives on electricity prices. The algorithm is based on approximating the generator of the underlying price process on a lattice of prices, resulting in an approximation of the stochastic process by a continuous time Markov chain. We numerically...

This study attempts to show how a Kohonen map can be used to improve the temporal stability of the accuracy of a financial failure model. Most models lose a significant part of their ability to generalize when data used for estimation and prediction purposes are collected over different time...

We extend the theory of asymmetric information in mispricing models for stocks following geometric Brownian motion to constant relative risk averse investors. Mispricing follows a continuous mean-reverting Ornstein–Uhlenbeck process. Optimal portfolios and maximum expected log-linear utilities...

This paper proposes the way of setting the dynamic impawn rate by dividing the impawn periods into different risk windows. In an efficient financial market, the return is hypothetically independent, while in a pledged inventory market where spot transactions predominate, the return is...

Trend following strategies have the reputation of being the holy grail of investment. This paper investigates the trend following strategy both from a theoretical and empirical perspective. This article also discusses conditional expected return and the drawdown with Value at Risk (VaR). VaR...

Using data from the 1977 Consumer Credit Survey and from the 1989 Survey of Consumer Finances, we investigate changes in the percentage of households with deposit accounts. We find that, among households earning $84,000 or less in 1991 prices, the percentage of households with deposit accounts...

We investigate the long-standing puzzle on the underpricings of convertible bonds. We hypothesize that the observed underpricing is induced by the possibility that a convertible bond might renegotiate on some of its covenants, e.g., an imbedded put option in financial difficulties. Consistent...

Banking has been a fertile area for management science applications, as is evident from the review provided in this paper. The relevant management science models are discussed in terms of the areas of bank management for which they were intended. Under dynamic balance sheet management (i.e.,...

Once they have observed information, hindsight-biased agents fail to remember how ignorant they were initially; "they knew it all along." We formulate a theoretical model of this bias, providing a foundation for empirical measures and implying that hindsight-biased agents learning about...