The set of option pricing bounds determined by the observed prices of the underlying security and a riskless bond is improved by the sequential addition of observations of the prices of other options on the same security with concurrent expiry. Each market-traded asset which can be functionally linked to the initial option imposes constraints on the set of state discount factors that serve to p...

Options are popular financial derivatives that play essential roles in financial markets. How to price them efficiently and accurately is very important both in theory and practice. Options are often priced by the lattice model. Although the prices computed by the lattice converge to the theoretical option value under the continuous-time model, they may converge slowly. Worse, for some options ...

This paper develops the CCAPM model to allow for long-run risk in durable consumption. Allowing Epstein-Zin preferences to incorporate non-separability of durable and non-durable consumption in utility provides for an Euler equation which can be shown to provide a much better explanation of equity market features than either the basic CAPM or CCAPM. .The paper incorporates this discount factor ...

The online version of A Behavioral Approach to Asset Pricing by Hersh Shefrin. Part III: Developing Behavioral Asset Pricing Models.A unified behavioral approach to asset pricing requires a general definition of sentiment. Objective pdf and the individual investors subjective pdf. ÂœA mathematical-economist-turned-behavioral-economist, Hersh Shefrin challenges and delights the reader by applyin...

Rainfall derivatives are in their infancy since starting trading on the Chicago Mercentile Exchange (CME) since 2011. Being a relatively new class of financial instruments there is no generally recognised pricing framework used within the literature. In this paper, we propose a novel framework for pricing contracts using Genetic Programming (GP). Our novel framework requires generating a risk-n...

In this paper two different methods are presented to approximate the solution of the fractional Black-Scholes equation for valuation of barrier option. Also, the two schemes need less computational work in comparison with the traditional methods. In this work, we propose a new generalization of the two-dimensional differential transform method and decomposition method that will extend the appli...

Using the concept of a copula, this paper shows how to estimate association across financial markets, with a focus on the structure of dependence rather than the degree of dependence. A mixed copula model is constructed so that it can capture various patterns of dependence structures. An inferential apparatus for this approach is developed and the methodology is applied to estimate the dependen...

Financial modeling is one application that benefits substantially from Grid's multiprocessing capabilities. Together with the Centre for Financial Engineering, TCG@NUS’s project team worked on identifying suitable applications and enabling them on the TCG@NUS. The first application identified was Structured Product Pricing (SPP) a Monte Carlo-style simulation application which uses the historic...

We explore the use of deep learning hierarchical models for problems in financial prediction and classification. Financial prediction problems – such as those presented in designing and pricing securities, constructing portfolios, and risk management – often involve large data sets with complex data interactions that currently are difficult or impossible to specify in a full economic model. App...