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11 – 20 of over 1000
Book part
Publication date: 11 December 2006

Chuang-Chang Chang and Yu Jih-Chieh

We set out, in this paper, to extend the Das and Sundaram (2000) model as a means of simultaneously considering correlated default risk structure and counter-party risk. The…

Abstract

We set out, in this paper, to extend the Das and Sundaram (2000) model as a means of simultaneously considering correlated default risk structure and counter-party risk. The multinomial model established by Kamrad and Ritchken (1991) is subsequently modified in order to facilitate the development of a computational algorithm for valuing two types of active credit derivatives, credit-spread options and default baskets. From our numerical examples, we find that along with the correlated default risk, the existence of counter-party risk results in a substantially lower valuation of credit derivatives. In addition, we find that different settings of the term structure of interest rate volatility also have a significant impact on the value of credit derivatives.

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Research in Finance
Type: Book
ISBN: 978-1-84950-441-6

Book part
Publication date: 23 October 2002

Andrew H. Chen

Abstract

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Research in Finance
Type: Book
ISBN: 978-0-76230-965-8

Book part
Publication date: 27 February 2009

Andrew H. Chen, James A. Conover and John W. Kensinger

It is fundamental to good governance that corporate decision makers be well informed, have the knowledge-base necessary to use the information effectively, and share the same…

Abstract

It is fundamental to good governance that corporate decision makers be well informed, have the knowledge-base necessary to use the information effectively, and share the same motivations as the owners. Further, managers must provide owners with accurate, timely, and complete disclosure of the company's positions. Regarding the first part of the problem, value-based incentive systems have been under development in order to aid in resolving conflicts of interest between owners who lack the specific information (or the background knowledge to utilize it) and the managers who act as their agents. Such systems often focus exclusively upon cash flows relative to resource investment; yet, share values are often substantially greater than the amount that could be explained by expected cash flows from existing operations. Indeed, in some firms the majority of share value may derive from growth opportunities or other real options that add flexibility or reduce risk. So, value-based incentive systems could be improved by explicitly rewarding actions that create or enhance the firm's real options. Further, satisfactory disclosure requires that accounting reports include adequate information about the firm's real options, with market-based mechanisms for defining the necessary information and calling it into the appropriate arena.

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Research in Finance
Type: Book
ISBN: 978-1-84855-447-4

Book part
Publication date: 1 January 2005

Abstract

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Research in Finance
Type: Book
ISBN: 978-0-76231-277-1

Book part
Publication date: 27 February 2009

Charnwut Roongsangmanoon, Andrew H. Chen, Joseph Kang and Donald Lien

Empirical evidence of the hedging pressure risk premium exists only in the futures contracts with delivery-related options. Since hedging pressure is supposed to exist for all…

Abstract

Empirical evidence of the hedging pressure risk premium exists only in the futures contracts with delivery-related options. Since hedging pressure is supposed to exist for all futures contracts, the empirical evidence raises an interesting empirical question: whether the hedging pressure risk premium is in fact the risk premium associated with the delivery-related options. This chapter contains an empirical test of the non-redundancy between the two related but alternative sources of non-market risks. For the test, we employs a futures risk premia model in which the expected futures returns contain the market risk premium (proxied by the equity market risk premium) and two non-market risk premia (proxied by the hedging pressure effect and by the delivery risk premium reflected in the returns of futures options, respectively). Our main finding is that both the hedging pressure and the delivery risk premia are non-redundant and statistically significant for futures contracts with delivery-related options. This finding implies a substantial degree of segmentations between these futures markets and the underlying asset markets.

Details

Research in Finance
Type: Book
ISBN: 978-1-84855-447-4

Book part
Publication date: 11 December 2006

Since its first appearance in 1979, Research in Finance has continued to publish novel, theoretical, and empirical research papers that represent significant contributions to…

Abstract

Since its first appearance in 1979, Research in Finance has continued to publish novel, theoretical, and empirical research papers that represent significant contributions to important areas in finance, and economics.

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Research in Finance
Type: Book
ISBN: 978-1-84950-441-6

Book part
Publication date: 4 March 2008

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Research in Finance
Type: Book
ISBN: 978-1-84950-549-9

Book part
Publication date: 27 February 2009

Abstract

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Research in Finance
Type: Book
ISBN: 978-1-84855-447-4

Content available
Book part
Publication date: 4 March 2008

Abstract

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Research in Finance
Type: Book
ISBN: 978-1-84950-549-9

Book part
Publication date: 27 November 2017

Andrew H. Chen, James A. Conover and John W. Kensinger

Option models have provided insight into the value of flexibility to switch from one state to another (such as switching a mine or refinery from operating to closed status). More…

Abstract

Option models have provided insight into the value of flexibility to switch from one state to another (such as switching a mine or refinery from operating to closed status). More complex flexible processes offer multiple possibilities for switching states. A fabrication facility, for example, may offer options to shift from the current status to any of several alternatives (reflecting reconfiguration of basic facilities to accommodate different operating processes with different outputs). New algorithms enable practical application of complex option pricing models to flexible facilities, improving analysts’ ability to draw sound conclusions about the effects of flexibility and innovativeness on share value. Such models also apply for options with information items as the underlying assets. Information organizations such as oil exploration and development companies may include options to shift from the current capability to any of several alternatives reflecting added abilities to handle new information sources or apply the organization’s talents in new ways. In the case of either physical or information processing, careful attention to estimating the matrix of correlations among the values of potential alternative states allows explicit integration of financial analysis and strategic analysis – especially the influence of substitutes and the anticipated reactions of competitors, suppliers, and potential new entrants.

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Growing Presence of Real Options in Global Financial Markets
Type: Book
ISBN: 978-1-78714-838-3

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11 – 20 of over 1000