Valuation of risky assets in arbitrage free economies with frictions

Article Abstract:

Using convex programming techniques, a model for arbitrage is developed that is applicable to markets with frictions. The model hypothesizes the existence of valuation operators for friction markets, in much the same way that previous research generalizes the existence of these individuals for perfect markets. However, while valuation operators were described as linear operators in perfect markets, they are individual-specific in imperfect markets. In the discussion that follows this paper, the application of convex programming to model asset valuation processes involving risky assets is found to be attractive, but not as economically intuitive as utility-based valuation technique analysis.

Analysis, Conferences, meetings and seminars, Risk management, Arbitrage, American Finance Association

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A discrete time option model dependent on expected return: a note

Article Abstract:

After discussing derivations of call option models, call option pricing and put pricing, a formula is developed that is applicable to the pricing of European options related to 'log-normal' assets, assuming discrete time law and normal distribution of market factors, during a single period of pricing. The formula is an extension of the research performed by M. Brennan, as published in the March 1979 Journal of Finance under the title, 'The Pricing of Contingent Claims in Discrete Time Models'. The formula derived supports assumptions made by Brennan, because it does not reflect risk-neutral valuation.

Prices and rates, Stock options

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Currency Returns, Intrinsic Value, and Institutional-Investor Flows

Article Abstract:

Institutional-investor currency flows are found to be related to short-term currency returns, while long-term values and returns are related to fundamentals. Discussion focuses on intrinsic-value shocks and expected-return shocks.

Comparative analysis, Cash flow

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