Perpetual call options with non-tradability

Author(s):

Ashay Kadam

 et al.
Topic:
Finance
Industry:
Banking

We explicitly solve an optimal stopping problem related to the exercise of a perpetual American call option when the option holder cannot trade the underlying asset.

Updated: 22/09/2011
Comments:
Views: 3,860

Optimal bankruptcy time and consumption/investment policies on an infinite horizon with a continuous debt repayment until bankruptcy

Author(s):

Ashay Kadam

 et al.
Topic:
Finance
Industry:
Banking

In this paper we consider the optimization problem of an agent who wants to maximize the total expected discounted utility from consumption over an infinite horizon. The agent is under obligation to pay a debt at a fixed rate until he/she declares bankruptcy. At that point, after paying a fixed cost, the agent will be able to keep a certain fraction of the present wealth, and the debt will be forgiven. The selection of the bankruptcy time is taken to be at the discretion of the agent. The novelty of this paper is that at the time of bankruptcy the wealth process has a discontinuity, and that the agent continues to invest and consume after bankruptcy. We show that the solution of a free boundary problem satisfying some additional conditions is the value function of the above optimization problem. Particular examples such as the logarithmic and the power utility functions will be provided, and in these cases explicit forms will be given for the optimal bankruptcy time, investment and consumption processes.

Updated: 22/09/2011
Comments:
Views: 3,646

Estimation in the continuous time mover-stayer model with an application to bond ratings migration

Author(s):

Ashay Kadam

 et al.
Topic:
Finance

The aim of this paper is to introduce a continuous, time-nonhomogeneuous model for bond ratings migration, which also incorporates a simple form of population heterogeneity.

Updated: 22/09/2011
Comments:
Views: 4,141

Bayesian inference for issuer heterogeneity in credit ratings migration

Author(s):

Ashay Kadam

 et al.
Topic:
Finance
Industry:
Banking

In this paper, we provide Bayesian estimates to mitigate the problem of data sparsity. We apply them to the Moodys corporate bond default database.

Updated: 22/09/2011
Comments:
Views: 3,723

Executive stock options: value to the executive and cost to the firm

Author(s):

Ashay Kadam

 et al.
Topic:
Finance
Industry:
Banking

We develop a continuous time utility-based model for valuing executive stock options (ESOs). Assuming that the ESO is perpetual (has infinite maturity) and has no vesting restrictions, we explicitly solve for the optimal exercise policy and the value of an ESO from the executive's perspective.

Updated: 22/09/2011
Comments:
Views: 4,026

An overview of the issues surrounding stock market volatility

Author(s):

Elena Kalotychou

Topic:
Finance
Industry:
Banking

The current chapter provides an overarching review of the equity market volatility, covering areas that have caught the attention of practitioners and academics alike.

Updated: 22/09/2011
Comments:
Views: 3,617

IPO lockup arrangements and trading by insiders

Author(s):

Meziane Lasfer

Topic:
Finance
Industry:
Banking

We document that the average lockup of 365 days in the UK is higher than the US 180 days and many insiders trade within the lockup period. We find that prestigious underwriters and underwriter power (longer lockup) drive their trades.

Updated: 22/09/2011
Comments:
Views: 4,861

The determinants of bank performance in China

Author(s):

Shelagh Heffernan

China's banking system has undergone gradual reform since 1978, with a view to improving efficiency and resource allocation. Recent reforms have focused on allowing banks to list some shares on domestic and foreign exchanges, greater foreign equity participation in Chinese banks, and the establishment of new rural financial institutions.

Updated: 22/09/2011
Comments:
Views: 4,542

Financial innovation in the UK

Author(s):

Shelagh Heffernan

Topic:
Finance
Industry:
Banking

This study employs a recent national survey of over 1100 British financial firms to ascertain the determinants of financial innovation and their sales success using Logit and generalised Tobit models.

Updated: 22/09/2011
Comments:
Views: 3,129