Abstract not available

This work contributes to the methodology of valuation of financial derivative contracts in an incomplete market. It focuses on a special type of incompleteness caused by the presence of a non-traded stochastic risk factor, affecting the value of the contract. The non-traded risk factor may only appear in the payoff of the contract or, in addition, may enter the dynamics of the traded asset. We consider both cases. We suggest a discrete time discrete space binomial model for the traded stock and the non-traded risk factor. We work in the utility maximization framework with dynamically changing agent's preferences. We present a discrete time multi-period analog of the forward and backward utility processes recently developed in continuous time. We use methods of stochastic control and provide the indifference valuation algorithm with both the forward and backward dynamic utilities. We compare the two approaches and provide conditions under which they assign the same value to the contract. We show that unlike the backward dynamic utility, the forward dynamic utility yields prices that do not depend on the end of the investment horizon. We pay attention to the choice of the equivalent martingale measure used for valuation (i.e., the minimal martingale measure and the minimal entropy measure for the forward and the backward utility processes correspondingly). We explicitly characterize both measures and give conditions under which they coincide. We extend our algorithm to the case of American and partial exercise contracts. We illustrate our work with numerical examples, showing that in an incomplete market, a call option on a non-traded risk factor may optimally be exercised early, and that it may be optimal to exercise only a fraction of the total number of contracts held, if partial exercise is allowed. In continuous time we extend the existing results to the case of American contracts with both the backward and the forward utilities. We emphasize the similarities between our discrete time valuation algorithm and the continuous time valuation. The two approaches use the same pricing measures, yield prices through nonlinear functionals of similar form, exhibit a similar relationship between the backward and forward prices, and a similar structure for the aggregate minimal entropy. We believe that our work makes a contribution by exposing the two above mentioned ways of dependence on the non-traded risk factor, and by providing a new dynamic indifference pricing algorithm that allows consistent valuation across different investment horizons.

Firms can use financial derivatives to hedge risks and thereby decrease the probability of bankruptcy and increase total expected tax shields. Firms also can adjust their operational policies in response to fluctuations in prices, a strategy that is often referred to as "operational hedging". In this paper, I investigate the relationship between the optimal financial and operational hedging strategies for a firm, which are endogenously determined together with its capital structure. This allows me to examine how operational hedging affects debt capacity and total expected tax shields and to make quantitative predictions about the relationship between debt issues and hedging policies. I also model the effects of asymmetric information about firms' investment opportunities on their financing and hedging decisions. First, I examine the case in which both debt and hedging contracts are observable. Then, I study the case in which firms' hedging activities are not completely transparent. The models are tested using a data set compiled from the annual reports of North American gold mining companies. Supporting evidence is found for the key predictions of the model under asymmetric information.

Wadley’s problem frequently emerges in dosage-mortality data and is one in which the number of surviving organisms is observed but the number initially treated is unknown. Data in this setting are also often overdispersed, that is the variability within the data exceeds that described by the distribution modelling it. The aim of this thesis is to explore distributions that can accommodate overdispersion in a Wadley’s problem setting. Two methods are essentially considered. The first considers adapting the beta-binomial and multiplicative binomial models that are frequently used for overdispersed binomial-type data to a Wadley’s problem setting. The second strategy entails modelling Wadley’s problem with a distribution that is suitable for modelling overdispersed count data. Some of the distributions introduced can be used for modelling overdispersed count data as well as overdispersed doseresponse data from a Wadley context. These models are compared using goodness of fit tests, deviance and Akaike’s Information Criterion and their properties are explored. / Thesis (Ph.D.)-University of KwaZulu-Natal, Pietermaritzburg, 2009.

Zugl.: Frankfurt (Main), Universiẗat, Diss., 2008. / Literaturverz.

Thesis (Ph. D.)--University of North Texas, Dec., 2007. / Title from title page display. Includes bibliographical references.

Thesis (Ph.D.)--George Mason University, 2008. / Vita: p. 75. Thesis director: Willem Thorbeck. Submitted in partial fulfillment of the requirements for the degree of Doctor of Philosophy in Economics. Title from PDF t.p. (viewed Aug. 27, 2008). Includes bibliographical references (p. 70-74). Also issued in print.

Thesis (doctoral)--Johann Wolfgang Goethe-University, 2004. / Includes bibliographical references.

American options are the most commonly traded financial derivatives in the market. Pricing these options fairly, so as to avoid arbitrage, is of paramount importance. Closed form solutions for American put options cannot be utilised in practice and so numerical techniques are employed. This thesis looks at the work done by other researchers to find an analytic solution to the American put option pricing problem and suggests a practical method, that uses Monte Carlo simulation, to approximate the American put option price. The theory behind option pricing is first discussed using a discrete model. Once the concepts of arbitrage-free pricing and hedging have been dealt with, this model is extended to a continuous-time setting. Martingale theory is introduced to put the option pricing theory in a more formal framework. The construction of a hedging portfolio is discussed in detail and it is shown how financial derivatives are priced according to a unique riskneutral probability measure. Black-Scholes model is discussed and utilised to find closed form solutions to European style options. American options are discussed in detail and it is shown that under certain conditions, American style options can be solved according to closed form solutions. Various numerical techniques are presented to approximate the true American put option price. Chief among these methods is the Richardson extrapolation on a sequence of Bermudan options method that was developed by Geske and Johnson. This model is extended to a Repeated-Richardson extrapolation technique. Finally, a Monte Carlo simulation is used to approximate Bermudan put options. These values are then extrapolated to approximate the price of an American put option. The use of extrapolation techniques was hampered by the presence of non-uniform convergence of the Bermudan put option sequence. When convergence was uniform, the approximations were accurate up to a few cents difference.

Credit derivatives played a large role in intensifying losses during the subprime lending crisis, which began in 2007 in the US and spiralled into a financial crisis in 2008. One of the major reasons for this descent into financial crisis was the uncertainty about the exposure of some systemically important financial institutions through their derivative positions, specifically credit derivative instruments such as credit default swaps (CDSs). Using data obtained from the SARB, the study found that prior to the crisis, the size of the South African OTC credit derivatives market was increasing steadily. However, the 2008 financial crisis temporarily stunted this growth, and the size of the market declined. Since 2010, the growth of the market has once again been on an upward trajectory. The study examines recent international and local regulations relating to OTC derivatives and makes policy recommendations for South Africa. / Economics / M. Com. (Economics)