The Even Swap method, originally outlined by Benjamin Franklin 230 years ago, is a rational way of finding the best alternative by evenly swapping decision criteria. This study develops a Decision Ball model to assist a decision maker in ranking alternatives and visualizing decision process based on the Even Swap concept. By viewing the moving trajectories of alternatives on spheres, a decision...

This paper investigates dislocations in the foreign exchange (FX) swap market between the US dollar and three major European currencies. After the failure of Lehman Brothers in September 2008, deviations from covered interest parity (CIP) were negatively associated with the creditworthiness of US financial institutions (as well as that of European institutions), consistent with the deepening of...

We study a three-firm contagion model with counterparty risk and apply this model to price defaultable bonds and credit default swap CDS . This model assumes that default intensities are driven by external common factors as well as other defaults in the system. Using the “total hazard” approach, default times can be generated and the joint density function is obtained. We represent the pricing ...

We propose a direct and robust method for quantifying the variance risk premium on financial assets. We show that the risk-neutral expected value of return variance, also known as the variance swap rate, is well approximated by the value of a particular portfolio of options.We propose to use the difference between the realized variance and this synthetic variance swap rate to quantify the varia...

Laptop computers and tablet PCs currently exploit swap system with their second storage media as a cost effective solution to extend limited memory space. The rapidly evolving flash memory technology starts to replace the magnetic disks of these computers by flash memory due to its advantageous characteristics such as energy efficiency and mechanical shock resistance. Thus, we can imagine that ...

This review of the pricing of credit swaps, a form of derivative security that can be viewed as default insurance on loans or bonds, begins with a description of the credit swap contract, turns to pricing by reference to spreads over the risk-free rate of par floating-rate bonds of the same quality, and then considers model-based pricing. The role of asset swap spreads as a reference for pricin...

Let the underlying process Y be a semimartingale taking values in an interval I. Let φ : I → R be a difference of convex functions, and let X := φ(Y ). A typical application takes Y to be a positive price process and φ(y) = log y for y ∈ I = (0,∞). Then [the floating leg of] a forward-starting weighted variance swap or generalized variance swap on φ(Y ) (shortened to “on Y ” if the φ is underst...

If the contract makes dividend adjustments (as typical for contracts on single stocks but not on indices), then the term inside the parentheses becomes log((Yn+Dn)/Yn−1), where Dn denotes the dividend payment, if any, of the nth period. Corridor variance swaps accumulate only the variance that occurs while price is in the corridor. The buyer therefore pays less than the cost of a full variance ...