Technical paper
Market power in the German wholesale electricity market
Research Papers
Impacts of regulatory announcements on CO 2 prices
Research Papers
Questionable usefulness of restricting short sales
The subprime crisis made investors wary of the shares of financial institutions. The share prices of these institutions have experienced exceptionally steep falls, none more so than those of the summer of 2008.
Investigating parameter risk for Solvency II and ICAS
Technical papers
Pricing options on film revenue
This article illustrates two models for cumulative revenues from films, a time-changed gamma process and a compound Poisson process, and how these models can be used to price options. Don Chance, Eric Hillebrand and Jimmy Hilliard find that while both…
Inflation modelling with SABR dynamics
Fabio Mercurio and Nicola Moreni introduce a new forward Consumer Price Index model that is based on a multi-factor volatility structure and leads to SABR-like dynamics for forward inflation rates. Their approach reconciles zero-coupon and year-on-year…
A dynamic model for hard-to-borrow stocks
Traders with short positions in stocks that are subject to short-selling restrictions risk being 'bought in', in the sense that their positions may be closed out by the clearing firm at market prices. Marco Avellaneda and Mike Lipkin present a model for…
Index performance analysis gives strategy perspective
In a recent report (V Le Sourd, February 2009, Hedge Fund Performance in 2008, EDHEC Publication) an analysis of 12 years of data on EDHEC Alternative I for different hedge fund strategies provided some perspective on their performance.
Robust asset allocation under model risk
Financial investors often develop a multitude of models to explain financial securities' dynamics, none of which they can fully trust. Model risk (also referred to as ambiguity) prevents investors from using the classical framework of expected utility…
Joining the SABR and Libor models together
Fabio Mercurio and Massimo Morini propose a Libor market model consistent with SABR dynamics and develop approximations that allow for the use of the SABR formula with modified inputs. They verify that the approximations are acceptably precise, imply…
Pricing options on film revenue
This article illustrates two models for cumulative revenues from films, a time-changed gamma process and a compound Poisson process, and how these models can be used to price options. Don Chance, Eric Hillebrand and Jimmy Hilliard find that while both…