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Contingent Claims Evaluation when the Convenience Yield is Stochastic: Analytical Results
(Discussion paper;1/91, Working paper, 199102)This paper considers contingent claims on a commodity when both the spot price and the convenience yield are generated by diffusion processes. By adopting the Gibson and Schwartz (1990) assumptions on the economy, we derive ... 
American derivatives : a review
(Discussion paper, Working paper, 199712)The paper gives an overview over the theory of pricing and hedging financial derivatives that can be exercised at any time during a fixed time interval [0, T]. The analysis makes use of the theory of optimal stopping, and ... 
Seasoned public offerings: Resolution of the "new issues puzzle"
(Discussion paper;09/98, Working paper, 1998)The `new issues puzzle' is that stocks of common stock issuers subsequently underperform non issuers matched on size and booktomarket ratio. With 7,000+ seasoned equity and debt issues, we document that issuer ... 
Estimating the parameters of stochastic differential equations using a criterion function based on the KolmogorovSmirnov statistic
(Discussion paper, Working paper, 1998)Estimation of parameters in the drift and diffusion terms of stochastic differential equations involves simulation and generally requires substantial data sets. We examine a method that can be applied when available time ... 
A short introduction to mathematical finance
(Discussion paper, Working paper, 1998)We give a brief survey of some fundamental concepts, methods and results in the mathematics of finance. The survey covers the 3 topics Chapter 1: Markets and arbitrages. The oneperiod model. The multiperiod model. The ... 
Adaptive regulation with flow and stock externalities
(Discussion paper, Working paper, 199801)In confronting a consumer good whose production process is associated with both flow and stock externalities, a corrective tax is introduced to restore efficiency. The objective is to maximize social welfare over time when ... 
An approach to adaptive carbon taxes in the presence of global warming
(Discussion paper, Working paper, 199801)The optimal extraction path of fossil fuels and the corresponding corrective tax on extraction are derived when two types of externalities associated with emission of carbondioxide (CO2) are taken into account. The optimal ... 
Fat and skew : can NIG cure? : on the prospects of using the normal inverse Gaussian distribution in finance
(Discussion paper, Working paper, 199803)This paper explores the possibility of using the Normal Inverse Gaussian (NIG) distribution introduced by BarndorffNielsen (1997) in various problem areas in finance where distributions often are found to be nonnormal ... 
MCMC analysis of diffusion models with application to finance
(Discussion paper, Working paper, 199803)In this paper a new method is proposed for estimation of parameters in diffusion processes from discrete observations. The proposed simulation based MCMC methodology applies to a wide class of models including systems with ... 
Pricing rate of return guarantees in a HeathJarrowMorton framework
(Discussion paper, Working paper, 199807)Rate of return guarantees are included in many financial products, for example life insurance contracts or guaranteed investment contracts issued by investment banks. The holder of such a contract is guaranteed a fixed ... 
Optimal management of renewable resources : a general feedback approach
(Discussion paper, Working paper, 199809)Analytical solutions for optimal exploitation of renewable capital stocks are derived as feedback rules for a quite general optimization problem. By feedback rules is meant that optimal exploitation is given as an explicit ... 
The St. Petersburg Paradox
(Discussion paper, Working paper, 199809)The classical St. Petersburg Paradox is discussed in terms of doubling strategies. It is claimed that what was originally thought of as a "paradox" can hardly be considered as very surprising today, but viewed in terms of ... 
Design and pricing of equitylinked life insurance under stochastic interest rates
(Discussion paper, Working paper, 199811)A valuation model for equitylinked life insurance contracts incorporating stochastic interest rates is presented. Our model generalizes some previous pricing results based on deterministic interest rates. Moreover, a ... 
Annuity factors, duration and convexity : insights from a financial engineering perspective
(Discussion paper, Working paper, 199812)This paper applies a unified and integrative financial engineering perspective to key derived concepts in traditional fixed income analysis, with the purpose of enhancing conceptual insights and motivating computational ... 
Asset ownership and implicit contracts
(Discussion paper, Working paper, 199812)In a setting with two managers/owners who both make relation and assetspecific investments, I suggest a model where a linear implicit contract can strengthen the incentives to invest, if the parties are sufficiently ... 
Asset ownership and risk aversion
(Discussion paper, Working paper, 199812)I suggest a model for two managers/owners and two assets, where the optimal allocation of ownership rights is jointly determined by the parties’ risk aversion and the specificity of their investments. The managers are ... 
Earnings manipulation : cost of capital versus tax
(Discussion paper, Working paper, 1999)We show that if taxable income were linked to accounting income, there will exist an automatic safeguard against manipulation of earnings within the analyzed framework. Separating taxable income from accounting income will ... 
Common agency with outside options : the case of international taxation of an MNE
(Discussion paper, Working paper, 1999) 
Cashier fraud : data analysis in a context
(Discussion paper, Working paper, 1999)A true story is told about the role of a statistical expert witness in a cashier fraud case. It illustrates Shewhart’s first principle of understanding data: "Data have no meaning apart from their context". It may be used ... 
Zonal pricing in a deregulated electricity market
(Discussion paper, Working paper, 1999)In the deregulated Norwegian electricity market a zonal transmission pricing system is used to cope with network capacity problems. In this paper we will illustrate some of the problems that the zonal pricing system, as ...