This paper constitutes – to our best knowledge – the first econometric analysis on stock market effects of the EU Emission Trading Scheme (EU ETS). Our results suggest that EU Emission Allowance (EUA) price developments matter to the stock performance of electricity firms: EUA price changes and stock returns of the most important European electricity corporations are shown to be positively rela...

Given the quote price of a call or put option, the Black-Scholes implied volatility is the unique volatility parameter to be put into Black-Scholes formula to give the same price as the option quote price. This dissertation is concerned with the link between the implied volatility and the actual volatility of the underlying stock. Such a link is of particular practical interest since it relates...

This paper incorporates excess volatility in stock prices into a standard general equilibrium model and finds large welfare gains from stabilizing policies. Stock prices in this model aggregate information about fundamentals which is dispersed in the economy but also reflect excess volatility stemming from correlated distortions in beliefs. To solve the model, this paper develops a novel soluti...

During the past two years, Chinese joint-stock companies have been converting nontradable stock held by the state and state-controlled institutions, which constitute twothirds of all stock in Chinese firms, into stock that can trade on local exchanges. This ownership reform reduces direct state control over industrial enterprises. It also greatly increases the supply of stock, which threatens t...

The thesis studies the martingale properties, probabilistic methods and efficient unbiased Monte Carlo simulation methods for various time-homogeneous diffusion models commonly used in mathematical finance. Some of the popular stochastic volatility models such as the Heston model, the Hull-White model and the 3/2 model are special cases. The thesis consists of the following three parts: Part I ...

We treat the problem of option pricing under a stochastic volatility model that exhibits long-range dependence. We model the price process as a Geometric Brownian Motion with volatility evolving as a fractional Ornstein-Uhlenbeck process. We assume that the model has long-memory, thus the memory parameter H in the volatility is greater than 0.5. Although the price process evolves in continuous ...

A claim of Leland (1985) states that in the presence of transaction costs a call option on a stock S, described by geometric Brownian motion, can be perfectly hedged using Black-Scholes delta hedging with a modi ed volatility. Recently Kabanov and Safarian (1997) disproved this claim, giving an explicit (up to an integral) expression of the limiting hedging error, which appears to be strictly n...

Objective: There is a large theoretical literature regarding stock market manipulation. However, empirical evidence of manipulation remains scare especially in emerging markets like Iran. So, it is vital to detect and prevent. Manipulation distorts prices, thereby reducing market efficiency and harms public confidence. Distorted prices increase market volatility and risk. This study empirically...

Volatility as a phenomenon as well as a concept remains central to modern financial markets and academic research. The link between volatility and risk has been to some extent elusive, but stock market volatility is not necessarily a bad thing. In fact, fundamentally justified volatility can form the basis for efficient price discovery. In this context volatility dependence that implies predict...

We provide a structural approach to identify instantaneous causality effects between quoteto-quote durations and stock price volatility. So far, in the literature, instantaneous causality effects have either been excluded or cannot be identified separately from Granger type causality effects. By giving explicit moment conditions for observed returns over (random) duration intervals, we are able...