This paper develops a family of option pricing models when the underlying stock price dynamic
is modelled by a regime switching process in which prices remain in one volatility regime …

We consider portfolio allocation in which the underlying investment instruments are hedge
funds. We consider a family of utility functions involving the probability of outperforming a …

One of the first statistical arbitrage strategies is based on the simple idea of spreading stocks
(also known as pairs trading). The concept behind the strategy is to find similar securities …

This article presents a modification of Merton’s (1976) ruin option pricing model to estimate
the implied probability of default from stock and option market prices. To test the model, we …

… Ivilina Popova gratefully acknowledges summer research support provided by the Albers
School … David Morton and Elmira Popova’s research has been partially supported by NSF grant …

Hedge funds typically have non-normal return distributions marked by significant positive or
negative skewness and high kurtosis. Mean-variance optimization models ignore these …

We use a version of the Grossman and Hart principal-agent model with 10 actions and 10
states to produce quantitative predictions for executive compensation. Performance incentives …

This article considers the problem of pricing options in a market where the underlying process
is assumed to be driven by a Lúvy α-stable motion, which includes, as a special case, the …

We use jackknife-based estimators to reduce bias when estimating the optimal value of a
stochastic program. Our discussion focuses on an asset allocation model with a power utility …

We consider four utility functions, each of which incorporates a benchmark to better capture
the motivations of today’s portfolio managers. Assuming instrument returns are normally …