RESEARCH ACTIVITIES
At the moment, my research efforts are concentrated in 3
areas. These are:-
A. Interest rate models and the pricing of interest rate derivatives
- The research objective is to build multiple-factor models
of interest rates to enable us to price and hedge American-style
options on bonds, interest rates, and on other interest rate
dependent securities.
- The research method is to apply no-arbitrage conditions to
determine the term structure of interest rates, and then to approximate
the true interest-rate process with binomial distributions.
Working papers:
1. 'The Term Structure of Interest
Rate Futures Prices', (with M Subrahmanyam), presented EFA, August 2001
[read abstract] [download
pdf]
2. 'The Libor Market Model: A Recombining Binomial Tree Methodology'
(with Sandra Derrick, Daniel J. Stapleton).
[read abstract] [download
pdf]
B. Portfolio Theory given Background Risk
- The research objective is to discover the reasons
why firms or individuals hedge by using option contracts.
Also, to find out what should be the optimal strategy for
an investor given labour-income risk.
- The research method involves building models where
agents are subject to multiple sources of risk. They react
to non-hedgeable background risk by over hedging the market
risks.
Working papers:
3 . ''Long-Term Portfolio Choice
Given Uncertain Personal Savings'', EFA 2002, (with
G Franke and S Peterson)
[read abstract] [download
pdf]
4. 'Multiplicative Background Risk',
(with G Franke and H Schlesinger)
[read abstract] [download
pdf]
5 . ''Asset Allocation Given Non-Market Wealth Risk and Rollover Risk'', (with G. Franke and H. Schlesinger)
[read abstract] [download
pdf]
6. 'Incremental risk vulnerability',
(with G. Franke and M. Subrahmanyam)
[read abstract] [download
pdf]
C. Option Pricing Theory and Techniques
- This research is aimed at pricing American-style
and Bermudan-style options, using binomial and related techniques
- Further work is concerned with processes under which
option risk-neutral valuation relationships can be derived.
Working papers:
7. 'Richardson Extrapolation Techniques
for Pricing American-style Options', (with C. Chang
and S. Chung)
[read abstract] [download pdf]
8. 'Two-Dimensional Risk-Neutral Valuation Relationships for the Pricing of Options' (with G.Franke and J. Huang)
[read abstract] [download pdf]
9. 'The Black Model and the Pricing of Options on Assets, Futures and Interest Rates' (with G Franke and J Huang)
[read abstract] [download pdf]
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