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Published / Preprint: European Option Pricing with Liquidity Shocks. (arXiv:1205.1007v1 [q-fin.PR])

May 7, 2012 by MoneyScience   Comments (0)

We study the valuation and hedging problem of European options in a market subject to liquidity shocks. Working within a Markovian regime-switching setting, we model illiquidity as the inability to trade. To isolate the impact of such liquidity constraints, we focus on the case where the market is completely static in the illiquid regime. We then consider derivative pricing using either equivalent martingale measures or exponential indifference mechanisms. Our main results concern the analysis...

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Published / Preprint: From Risk Measures to Research Measures. (arXiv:1205.1012v1 [q-fin.RM])

May 7, 2012 by MoneyScience   Comments (0)

In order to evaluate the quality of the scientific research, we introduce a new family of scientific performance measures, called Scientific Research Measures (SRM). Our proposal originates from the more recent developments in the theory of risk measures and is an attempt to resolve the many problems of the existing bibliometric indices. The SRM that we introduce are based on the whole scientist's citation record and are: coherent, as they share the same structural properties; flexible to fit...

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Blog Post: TheAlephBlog: We Eat Dollar Weighted Returns ' IV

May 6, 2012 by MoneyScience   Comments (0)

I think one of the largest areas for practical investigation in finance is reviewing dollar-weighted versus time weighted returns, especially for vehicles that are traded heavily.  I am going to try to analyze one major ETF per month to see what the level of slippage is due to trading.read more...

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