Pricing and hedging bond options and sinking-fund bonds under the CIR model

<abstract><p>This article derives simple closed-form solutions for computing Greeks of zero-coupon and coupon-bearing bond options under the CIR interest rate model, which are shown to be accurate, easy to implement, and computationally highly efficient. These novel analytical solutions allow us to extend the literature in two other directions. First, the static hedging portfolio approach is used for pricing and hedging American-style plain-vanilla zero-coupon bond options under the CIR model. Second, we derive analytically the comparative static properties of sinking-fund bonds under the same interest rate modeling setup.</p></abstract>

Relative mispricing and takeover likelihood

<abstract> <p>This paper examines the effect of acquirer likelihood on future stock returns. In sharp contrast to prior findings, acquirer likelihood is a strong and negative predictor of cross-sectional future returns after controlling for target likelihood. If takeover exposure represents a risk premium, the effect on stock valuation should only present in either likelihood measure (acquirer or target likelihood). This evidence casts doubt on the rational risk explanation, but is consistent with a relative mispricing story. Investors take positions accordingly to explore profits from takeovers. Profits from trading strategy based on takeover probability are concentrated in stocks with high misvaluation characteristics, including small size, value, high momentum, high investment, and low turnover firms, as well as both high and low issuance (or accrual) firms.</p> </abstract>

Time-varying impact of U.S. financial conditions on China's inflation: a perspective of different types of events

<abstract> <p>In recent years, the frequency adjustment of U.S. monetary policy has a dynamic and global impact on other countries' economy. Based on the financial conditions index (FCI), the paper employs the time-varying parameter vector autoregressive model with stochastic volatility (TVP-VAR-SV) and spillover index respectively to investigate the time-varying impact of U.S. financial conditions (UFCI) on China's inflation (CINF) and its impact mechanisms. Some results are achieved as follows: first, the impacts of UFCI on CINF vary greatly over time both in the dimension of action duration and time point. Second, the effects of UFCI on CINF directly relate to different types of major events, and they are heterogeneous in action duration, degree, direction as well as the trend and range of fluctuations. In addition, UFCI can work on CINF through trade flow and China's financial market, and the China's financial market plays a main conductive role, and its conductive effect changes over time.</p> </abstract>