The efficient market hypothesis states that the market incorporates all available information to provide an accurate valuation of the asset at any given time. However, most models for forecasting the return or volatility of assets completely disregard the arrival of asset specific news (i.e., news which is directly relevant to the asset). In this paper we propose a simple adaptation to the GARC...

We use experiments to study the efficiency effects for a market as a whole of adding the possibility of forward contracting to a pre-existing spot market. We deal separately with the cases where spot market competition is in quantities and where it is in supply functions. In both cases we compare the effect of adding a contract market with the introduction of an additional competitor, changing ...

In this paper we present a model for the dynamic evolution of the term structure of default-free and defaultable interest rates. The model is set in the Libor market model framework but in contrast to the classical diffusion-driven setup, its dynamics are driven by a time-inhomogeneous Lévy process which allows us to better capture the real-world dynamics of credit spreads. We present necessary...

During the past two decades financial systems world-wide have developed rapidly in terms of size, industry structure, and the range of products and services produced. In Australia the size of the financial system, measured by total assets, has approximately doubled relative to nominal GDP in the past twenty years, while in a number of other countries the growth has been even more dramatic. More...

This paper explores firms’ incentives to engage in capacity preemption using a continuous-time real options game. Two ex ante identical firms can choose capacity and investment timing regarding the entry into a new industry whose demand grows until an unknown maturity date, after which it declines until it disappears. Previous literature usually predicts that the Stackelberg leader, whether end...

We consider a problem faced by an airline that operates a number of parallel flights to transport cargo between a particular origin to destination pair. The airline can sell its cargo capacity either through allotment contracts or on the spot market, where customers exhibit choice behavior between different flights. The goal is to simultaneously select allotment contracts among available bids a...

The main objectives of the Third Gas Directive (2009/73EC) approved by the European Union are: unbundling, creating an independent Transport Service Operator (TSO) and ensuring free access to the market. The separation of gas trading from transportation activities required new market rules and gas balancing. Thereby, the TSO's responsibilities are to maintain network pressures within acceptable...

Semiconductor capacity planning is a cross-functional decision that requires coordination between the marketing and manufacturing divisions. We examine main issues of a decentralized coordination scheme in a setting observed at a major US semiconductor manufacturer: marketing managers reserve capacity from manufacturing based on product demands, while attempting to maximize profit; manufacturin...

Cloud computing is a promising way providing users computing resources. These resources are provided by means of standard computing instances. Currently there are three price schemas including spot, reservation and on-demand in cloud market, but the average difference among these three pricing schema can be as much as 2.7 times even for the same instance type. In the premise of ensuring service...

We provide a comprehensive analysis of capacity investment decisions in duopoly models with demand uncertainty. Firms make capacity investment, production, delivery and pricing decisions. Capacity investment decisions are always made ex-ante demand whereas price decisions always ex-post. The interplay between the timing of demand information and the decision of production and delivery endows fi...