Simon Benninga. Financial Modelling 3-rd edition

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1098 Selected References

Carhart, M. M. 2000. Forecasting the Size and Value Risk Premia. Powerpoint presenta-

tion available on Web. http://leeds.colorado.edu/uploadedFiles/FacultyandResearch/

ResearchCenters/BurridgeCenterforSecuritiesAnalysisandValuation/Conferences/2000/

carhart.ppt

Chopra, V., and William Ziemba. 1993. The Effect of Errors in Means, Variances, and

Covariances on Optimal Portfolio Choice. Journal of Portfolio Management, 19.

DeMiguel, V., L. Garlappi, and R. Uppal. 2007. Optimal versus Naive Diversiﬁ cation: How

Inefﬁ cient Is the 1/N Portfolio Strategy? Review of Financial Studies, 21.

Frost, P. A., and J. E. Savarino. 1986. An Empirical Bayes Approach to Portfolio Selection.

Journal of Financial and Quantitative Analysis, 21.

Goldman Sachs. 1999. The Intuition Behind Black-Litterman Model Portfolios.

Jagannathan, R., and T. Ma. 2003. Risk Reduction in Large Portfolios: Why Imposing the

Wrong Constraint Helps. Journal of Finance, 54.

Jorion, P. 1986. Bayes-Stein Estimation for Portfolio Analysis. Journal of Financial and

Quantitative Analysis, 21.

Kandel, S., and R. F. Stambaugh. 1995. Portfolio Inefﬁ ciency and the Cross-Section of

Expected Returns. Journal of Finance, 50.

Litterman, R. 2003. Modern Investment Management: An Equilibrium Approach. Wiley.

Satchell, S., and A. Scowcroft. 2000. A Demystiﬁ cation of the Black–Litterman Model:

Managing Quantitative and Traditional Portfolio Construction. Journal of Asset Manage-

ment, 1.

Stambaugh, R. 2000. Optimization and Views about Expected Returns: The Black-Litter-

man Model. Wharton class note.

Chapter 14: Event Studies

Ball, C., and W. Torous. 1988. Investigating Security Price Performance in the Presence of

Event Date Uncertainty. Journal of Financial Economics, 22.

Binder, J. 1985. On the Use of the Multivariate Regression Model in Event Studies. Journal

of Accounting Research, 23.

Boehmer, E., J. Musumeci, and A. Poulsen. 1991. Event- Study Methodology under Condi-

tions of Event-Induced Variance. Journal of Financial Economics, 30.

Brown, S., and J. Warner. 1985. Using Daily Stock Returns: The Case of Event Studies.

Journal of Financial Economics, 14.

Campbell, J. Y., A. W. Lo, and A. C. McKinley. 1996. The Econometrics of Financial Markets.

Princeton University Press.

Fama, E., L. Fisher, M. Jensen, and R. Roll. 1969. The Adjustment of Stock Prices to New

Information. International Economic Review, 10.

MacKinlay, A. C. 1997. Event Studies in Economics and Finance. Journal of Economic

Literature, 35.

Malatesta, P. 1986. Measuring Abnormal Performance: The Event Parameter Approach

Using Joint Generalized Least Squares. Journal of Financial and Quantitative Anal-

ysis, 21.

Salinger, Michael. 1992. Value Event Studies. Review of Economics and Statistics, 74.

Scholes, M., and J. Williams. 1977. Estimating Betas from Nonsynchronous Data. Journal

of Financial Economics, 5.

1099 Selected References

Sefcik, S., and R. Thompson. 1986. An Approach to Statistical Inference in Cross-Sectional

Models with Security Abnormal Returns as Dependent Variable. Journal of Accounting

Research, 24.

Thompson, R. 1985. Conditioning the Return-Generating Process on Firm Speciﬁ c Events:

A Discussion of Event Study Methods, Journal of Financial and Quantitative Analysis,

20.

Thompson, R. 1995. Empirical Methods of Event Studies in Corporate Finance. Chapter

29 in Handbooks in Operations Research and Management Science, vol. 9, ed. R. Jarrow

et al. Elsevier Science.

Chapter 15: Value at Risk

Beder T. 1996. VAR: Seductive but Dangerous. Financial Analyst Journal, 52.

Hull, J. C. 2006. Options, Futures, and Other Derivatives, 6th ed. Prentice Hall.

Jorion, P. 1997. Value at Risk, the New Benchmark for Controlling Market Risk.

McGraw-Hill.

Linsmeier, T., and N. Pearson. 1997. Risk Measurement: An Introduction to Value at Risk.

Mimeo, University of Illinois.

RiskMetrics, Introduction to RiskMetrics

. 1995. This and other documents can be found

at http://www.riskmetrics.com/techdoc.html.

Chapters 16–21: Options and Portfolio Insurance

Benninga, S., and M. Blume. 1985. On the Optimality of Portfolio Insurance. Journal of

Finance, 40.

Benninga, S., R. Steinmetz, and J. Stroughair. 1993. Implementing Numerical Option Pricing

Models. Mathematica Journal, 3.

Bhaghat, S., J. Brickley, and U. Loewenstein. 1987. The Pricing Effects of Interﬁ rm Cash

Tender Offers. Journal of Finance, 42.

Billingsley, P. 1968. Convergence of Probability Measures. Wiley.

Black, F., and M. Scholes. 1973. The Pricing of Options and Corporate Liabilities. Journal

of Political Economy, 81.

Bodie, Z., A. Kane, and A. J. Marcus. 2004. Investments, 6th ed. Irwin.

Brennan, M. J., and E. S. Schwartz. 1979. Alternative Investment Strategies for the Issuers

of Equity-Linked Life Insurance Policies with an Asset Value Guarantee. Journal of Busi-

ness, 52.

Brennan, M. J., and E. S. Schwartz. 1976. The Pricing of Equity-Linked Life Insurance Poli-

cies with an Asset Value Guarantee. Journal of Financial Economics, 3.

Brennan, M. J., and R. Solanki. 1981. Optimal Portfolio Insurance. Journal of Financial and

Quantitative Analysis, 16.

Copeland, T. E., J. F. Weston, and J. Shastri. 2003. Financial Theory and Corporate Policy.

Pearson.

Cox, J., and M. Rubinstein. 1985. Options Markets. Prentice Hall.

Cox, J., and S. A. Ross. 1976. The Valuation of Options for Alternative Stochastic Processes.

Journal of Financial Economics, 3.

1100 Selected References

Cox, J., S. A. Ross, and M. Rubinstein. 1979. Option Pricing: A Simpliﬁ ed Approach. Journal

of Financial Economics, 7.

Cvitanic´, J., Z. Wiener, and F. Zapatero. 2007. Analytic Pricing of Employee Stock Options.

Review of Financial Studies, 21.

Gatto, M. A., R. Geske, R. Litzenberger, and H. Sosin. 1980. Mutual Fund Insurance.

Journal of Financial Economics, 8.

Haug, E. G. 2006. The Complete Guide to Option Pricing Formulas, 2nd ed.

McGraw-Hill.

Hull, J. 2006. Options Futures, and Other Derivative Securities, 6th ed. Prentice Hall.

Hull, J., and A. White. 2004. How to Value Employee Stock Options. Financial Analysts

Journal, 60.

Jacobs, B. 1983. The Portfolio Insurance Puzzle. Pensions and Investment Age, 26.

Jacques, W. E. 1987. Portfolio Insurance or Job Insurance? Financial Analysts Journal, 7.

Jarrow, R. A., and A. Rudd. 1983. Option Pricing. Irwin.

Knuth, D. E. 1981. The Art of Computer Programming, vol. 2: Seminumerical Algorithms,

2nd ed. Addison-Wesley.

Leland, H. E. 1980. Who Should Buy Portfolio Insurance? Journal of Finance, 35.

Leland, H. E. 1985. Option Pricing and Replication with Transaction Costs. Journal of

Finance, 40.

Merton, R. 1973. Theory of Rational Option Pricing. Bell Journal of Economics and Man-

agement Science, 4.

Merton, R. 1976. Option Pricing When Underlying Stock Returns Are Discontinuous.

Journal of Financial Economics, 3.

Omberg, E. 1987. A Note on the Convergence of Binomial-Pricing and Compound-Option

Models. Journal of Finance, 42.

Pozen, R. C. 1978. When to Purchase a Protective Put. Financial Analysts Journal, 34.

Rubinstein, M. 1985. Alternative Paths to Portfolio Insurance. Financial Analysts

Journal, 41.

Rubinstein, M., and H. E. Leland. 1981. Replicating Options with Positions in Stock and

Cash. Financial Analysts Journal, 37.

Schwartz, E. S. 1986–87. Options and Portfolio Insurance. Finanzmarkt und Portfolio Man-

agement, 1.

Somes, S. P., and M. A. Zurack. 1987. Pension Plans, Portfolio Insurance, and FASB State-

ment No. 87: An Old Risk in a New Light. Financial Analysts Journal, 33.

Taleb, N. N. 1997. Dynamic Hedging: Managing Vanilla and Exotic Options. Wiley.

Chapters 22–23: Monte Carlo

Acworth, P., M. Broadie, and P. Glasserman. 1996. A Comparison of Some Monte Carlo

and Quasi–Monte Carlo Techniques for Option Pricing. In H. Niederreiter et al., eds.,

Monte Carlo and Quasi–Monte Carlo Methods. Springer-Verlag, Lectures Notes in

Statistics.

Bailey, D. H., J. M. Borwein, and P. B. Borwein. 1987. Ramanujan, Modular Equations, and

Approximations to π Or How to Compute One Billion Digits of Pi. American Mathematical

Monthly, 96.

1101 Selected References

Barone-Adesi, G., and R. E. Whaley. 1987. Efﬁ cient Analytic Approximation of American

Option Values. Journal of Finance, 42.

Boyle, P., M. Broadie, and P. Glasserman. 1997. Monte Carlo Methods for Security Pricing

Journal of Economic Dynamics and Control, 21.

Boyle, P. 1977. Options: A Monte Carlo Approach. Journal of Financial Economics, 4.

Boyle, P. P., A. W. Kolkiewicz, and K. S. Tan. 2002. Pricing American Derivatives Using

Simulation: A Biased Low Approach. In K.-T. Fang, F. J. Hickernell, and H. Niederreiter,

eds., Monte Carlo and Quasi–Monte Carlo Methods 2000. Springer-Verlag.

Boyle, P., and S. H. Lau. 1994. Bumping Up Against the Barrier with the Binomial Method.

Journal of Derivatives, 2.

Boyle, P. P., and Y. K. Tse. 1990. An Algorithm for Computing Values of Options on the

Maximum or Minimum of Several Assets. Journal of Financial and Quantitative

Analysis, 25.

Broadie, M., and P. Glasserman. 1997. Pricing American-Style Securities Using Simulation.

Journal of Economic Dynamics and Control, 21.

Broadie, M., P. Glasserman, and G. Jain. 1997. Enhanced Monte Carlo Estimates for Ameri-

can Option Prices. Journal of Derivatives, 5.

Broadie, M., P. Glasserman, and S. Kou. 1997. A Continuity Correction for Discrete Barrier

Options. Mathematical Finance, 7.

Douady, R. 2001. Bermudan Option Pricing with Monte-Carlo Methods. In Marco Avella-

neda, ed., Quantitative Analysis in Financial Markets, vol. 3. World Scientiﬁ c Publishing.

Dufﬁ e, D., and P. Glynn. 1995. Efﬁ cient Monte Carlo Simulation of Security Prices. Annals

of Applied Probability, 5.

Dupire, B., and A. Savine. 1998: Dimension Reduction and Other Ways of Speeding Monte

Carlo Simulation. In Dupire, B. ed., Monte Carlo—Methodologies and Applications for

Pricing and Risk Management. Risk Books.

Fu, M. C., S. B. Laprise, D. B. Madan, Y. Su, and R. Wu. 2001. Pricing American Options:

A Comparison of Monte Carlo Simulation Approaches. Journal of Computational

Finance, 4.

Gentle, J. E. 1998. Random Number Generation and Monte Carlo Methods.

Springer-Verlag.

Glasserman, P. 2004. Monte Carlo Methods in Financial Engineering. Springer-Verlag.

Ibáñez, A. 2004. Valuation by Simulation of Contingent Claims with Multiple Early Exer-

cises Opportunities. Mathematical Finance, 14.

Jäckel, P. 2002. Monte Carlo Methods in Finance. Wiley.

Joy, C., P. P. Boyle, and K. S. Tan. 1996. Quasi–Monte Carlo Methods in Numerical Finance.

Management Science, 42.

Kanigel, Robert. 1991. The Man Who Knew Inﬁ nity: A Life of the Genius Ramanujan.

Charles Scribner.

Knuth, D. E. 1998. The Art of Computer Programming, vol. 2: Seminumerical Algorithms,

3rd ed. Addison-Wesley.

Longstaff, F. A., and E. S. Schwartz. 2001. Valuing American Options by Simulation: A

Simple Least-Square Approach. Review of Financial Studies, 14.

Metropolis, N., and S. Ulam. 1949. The Monte Carlo Method. Journal of the American Sta-

tistical Association, 44.

Morokoff, W. J. 1998. Generating Quasi-Random Paths for Stochastic Processes. SIAM

Review, 40.

1102 Selected References

Paskov, S. H. 1997. New Methodologies for Valuing Derivatives. In Dempster M. A. H., and

S. R. Pliska, eds., Mathematics of Derivatives Securities. Cambridge University Press.

Raymar, S. B., and M. J. Zwecher. 1997. Monte Carlo Estimation of American Call Option

on the Maximum of Several Assets. Journal of Derivatives, 5.

Rubinstein, M., and E. Reiner. 1991. Breaking Down the Barriers. Risk, 4.

Tavella, D. 2002. Quantitative Methods in Derivatives Pricing—An Introduction to Compu-

tational Finance. Wiley.

Chapter 24: Real Options

Amram, M., and N. Kulatilaka. 1998. Real Options: Managing Strategic Investment in an

Uncertain World. Harvard Business School Press.

Benninga, S., and E. Tolkowsky. 2004. Real Options—An Introduction and an Application

to R&D Valuation. Engineering Economist, 47.

Dixit, A. K., and R. S. Pindyck. 1995. The Options Approach to Capital Investment. Harvard

Business Review, 73.

Kellogg, D., and J. M. Charnes. 2000. Real-Options Valuation for a Biotechnology Company.

Financial Analysts Journal, 56.

Luehrman, T. A. 1998. Investment Opportunities as Real Options: Getting Started on the

Numbers. Harvard Business Review, 76.

Trigeorgis, L. 1993. Real Options and Interactions with Financial Flexibility. Financial

Management, 22.

Trigeorgis, L. 1995. Real Options in Capital Investment: Models, Strategies, and Applications.

Praeger.

Trigeorgis, L. 1996. Real Options: Managerial Flexibility and Strategy in Resource Allocation.

MIT Press.

Chapters 25–26: Duration and Immunization

Altman, E. 1989. Measuring Corporate Bond Mortality and Performance. Journal of

Finance, 44.

Altman, E., and V. M. Kishore. 1996. Almost Everything You Wanted to Know about

Recoveries on Defaulted Bonds. Financial Analysts Journal, 52.

Babcock, G. 1985. Duration as a Weighted Average of Two Factors. Financial Analysts

Journal, 41.

Benninga, S., and A. Protopapadakis. 1986. General Equilibrium Properties of the Term

Structure of Interest Rates. Journal of Financial Economics, 16.

Bierwag, G. O. 1977. Immunization, Duration, and the Term Structure of Interest Rates.

Journal of Financial and Quantitative Analysis.

Bierwag, G. O. 1978. Measures of Duration. Economic Inquiry, 16.

Bierwag, G. O., G. G. Kaufman, and A. Toevs. 1983a. Duration: Its Development and Use

in Bond Portfolio Management. Financial Analysts Journal, 38.

Bierwag, G. O., G. G. Kaufman, and A. Toevs. 1983b. Innovations in Bond Portfolio Manage-

ment: Duration Analysis and Immunization. JAI Press.

1103 Selected References

Bierwag, G. O., G. G. Kaufman, R. Schweitzer, and A. Toevs. 1981. The Art of Risk Manage-

ment in Bond Portfolios. Journal of Portfolio Management, 7.

Billingham, C. J. 1983. Strategies for Enhancing Bond Portfolio Returns. Financial Analysts

Journal, 39.

Chance, D. M. 1983. Floating Rate Notes and Immunization. Journal of Financial and

Quantitative Analysis, 18.

Chance, D. M., and J. V. Jordan. 1996. Duration Convexity, and Time as Components of

Bond Returns. Journal of Fixed Income, 6.

Chua, J. H. 1984. A Closed-Form Formula for Calculating Bond Duration. Financial Ana-

lysts Journal.

Cooper, I. A. 1977. Asset Values, Interest Rate Changes, and Duration. Journal of Financial

and Quantitative Analysis, 12.

Cox, J., J. Ingersoll, and S. Ross. 1979. Duration and Measurement of Basis Risk. Journal

of Business, 52.

Cox, J. C., J. E. Ingersoll, and S. A. Ross. 1985. A Theory of the Term Structure of Interest

Rates. Econometrica 53.

Fisher, L., and R. L. Weill. 1971. Coping with the Risk of Market-Rate Fluctuations: Returns

to Bondholders from Naive and Optimal Strategies. Journal of Business, 44.

Gultekin, B., and R. J. Rogalski. 1984. Alternative Duration Speciﬁ cations and the Measure-

ment of Basis Risk: Empirical Tests. Journal of Business, 57.

Gushee, C. H. 1981. How to Immunize a Bond Investment. Financial Analysts Journal.

Hicks, J. 1939. Value and Capital. Clarendon Press.

Ingersoll, J. E., Jr., J. Skelton, and R. L. Weil. 1978. Duration Forty Years Later. Journal of

Financial and Quantitative Analysis, 13.

Joehnk, M. D., H. R. Fogler, and C. E. Bradley. 1978. The Price Elasticity of Discounted

Bonds: Some Empirical “Evidence.” Journal of Financial and Quantitative Analysis, 13.

Lanstein, R., and W. F. Sharpe. 1978. Duration and Security Risk. Journal of Financial and

Quantitative Analysis, 13.

Macaulay, F. R. 1938. Some Theoretical Problems Suggested by Movements of Interest Rates,

Bond Yields, and Stock Prices in the United States Since 1856. National Bureau of Economic

Research.

Macauley, F. R. 1983. The Movement of Interest Rates, Bonds, Yields, and Stock Prices in the

United States Since 1865. Columbia University Press.

McCullogh, J. H. 1990. U.S. Term Structure Data. 1946–1987. Handbook of Monetary Eco-

nomics, vol 1. North-Holland.

Morgan, G. E. 1986. Floating Rate Securities and Immunization: Some Further Results.

Journal of Financial and Quantitative Analysis, 21.

Ott, R. A., Jr. 1986. The Duration of an Adjustable-Rate Mortgage and the Impact of the

Index. Journal of Finance, 41.

Redington, F. M. 1952. Review of the Principle of Life-Ofﬁ ce Valuations. Journal of the

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Samuelson, P. A. 1945. The Effects of Interest Rate Increases on the Banking System.

American Economic Review, 35.

Smith, Donald J. 1998. A Note on the Derivation of Closed-Form Formulas for Duration

and Convexity Statistics on and between Coupon Dates. Journal of Financial Engi-

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1104 Selected References

Standard and Poor’s. 1996. Standard and Poor’s Corporate Ratings Criteria.

Vasicek, O. 1977. An Equilibrium Characterization of the Term Structure. Journal of Finan-

cial Economics, 5.

Weil, R. L. 1973. Macaulay’s Duration: An Appreciation. Journal of Business, 46.

Chapter 27: Fitting the Term Structure

Adams, K. J., and D. R. Van Deventer. 1994. Fitting Yield Curves and Forward Rate Curves

with Maximum Smoothness. Journal of Fixed Income, 4.

Chambers, D., W Carleton, and D. Waldman. 1984. A New Approach to Estimation of Term

Structure of Interest Rates. Journal of Financial and Quantitative Studies, 19.

Coleman, T. S., L. Fisher, and R. Ibbotson. 1992. Estimating the Term Structure of

Interest From Data That Include the Prices of Coupon Bonds. Journal of Fixed In-

come, 2.

Coleman, T. S., R. Ibbotson, and L. Fisher. 1993. Historical U.S. Treasury Yield Curves.

Ibbotson Associates.

Diament, Paul. 1993. Semi-empirical Smooth Fit to the Treasury Yield Curve. Journal of

Fixed Income, 3.

Fabozzi, F. J. 2003. Bond Markets, Analysis and Strategies, 5th ed. Prentice Hall.

Fisher, M., and D. Zervos. 1996. Yield Curve. In Computational Economics and Finance:

Modeling and Analysis with Mathematica, ed. H. R. Varian. Springer.

Gürkaynak, R. S., B. Sack, and J. H. Wright. 2006. The U.S. Treasury Yield Curve: 1961 to

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Jarrow, Robert A. 1996. Modeling Fixed Income Securities and Interest Rate Options.

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Jordan, J. V. 1984. Tax Effects in Term Structure Estimation. Journal of Finance, 39.

Litterman, R., and J. Scheinkman. 1991. Common Factors Affecting Bond Returns. Journal

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McCulloch, J. F. 1975. The Tax-Adjusted Yield Curve. Journal of Finance, 30.

Nelson, C., and A. Siegel. 1987. Parsimonious Modeling of Yield Curves. Journal of Busi-

ness, 60.

Shea, G. 1984. Pitfalls in Smoothing Interest Rate Term Structure Data: Equilibrium Models

and Spline Approximations. Journal of Financial and Quantitative Analysis, 19.

Shea, G. 1985. Interest Rate Term Structure Estimation with Exponential Splines: A Note.

Journal of Finance, 40.

Stigum, Marcia, and Franklin L. Robinson. 1996. Money Market and Bond Calculations.

Irwin Professional.

Suits, D. B., A. Mason, and L. Chan. 1978. Spline Functions Fitted by Standard Regression

Methods. Review of Economics and Statistics, 60.

Sundaresan, S. 1997. Fixed Income Markets and Their Derivatives. South-Western College

Publishing.

1105 Selected References

Taggart, Robert A., Jr. 1996. Quantitative Analysis for Investment Management. Prentice

Hall.

Tuckman, B. 1996. Fixed-Income Securities. Wiley.

Vasicek, O., and G. Fong. 1982. Term Structure Estimation Using Exponential Splines.

Journal of Finance, 38.

Chapter 28: Expected Bond Returns

Altman, E., and V. M. Kishore. 1996. Almost Everything You Wanted to Know about

Recoveries on Defaulted Bonds. Financial Analysts Journal, 52.

Altman, E. I., and A. C. Eberhart. 1994. Do Seniority Provisions Protect Bondholders’

Investments? Journal of Portfolio Management, 20.

Altman, E. I., and S. Nammacher. 1984. The Default Rate Experience of High Yield Cor-

porate Debt. Financial Analysts Journal, 40.

Amihud, Y., and H. Mendelson. 1991. Liquidity, Asset Prices, and Financial Policy. Financial

Analysts Journal, 47.

Amihud, Y., and H. Mendelson. 1991. Liquidity, Maturity, and the Yields on U.S. Treasury

Securities. Journal of Finance, 46.

Antonov, A., and Y. Yanakieva. 2004. Transition Matrix Generation. International Confer-

ence on Computer Systems and Technologies, CompSysTech’2004.

Bakshi G., D. B. Madan, and F. X. Zhang. 2004. Understanding the Role of Recovery in

Default Risk Models: Empirical Comparisons and Implied Recovery Rates. EFA 2004

Maastricht Meetings Paper No. 3584; AFA 2004 San Diego Meetings; FEDS Working Paper

No. 2001–37.

Cochrane, J. H. 2001. Asset Pricing. Princeton University Press.

Dufﬁ e, D., and K. J. Singleton. 1997. An Econometric Model of the Term Structure of Inter-

est-Rate Swap Yields. Journal of Finance, 52.

Dufﬁ e, D., and K. J. Singleton. 1999. Modeling Term Structures of Defaultable Bonds.

Review of Financial Studies, 12.

Dynkin L., A. Gould, J. Hyman, V. Konstantinovsky, and B. Phelps. 2006. Quantitative

Management of Bond Portfolios. Princeton University Press.

Jafry, Y., and T. Schuermann. 2003. Metrics for Comparing Credit Migration Matrices.

Wharton Financial Institutions Working Paper 03–08.

Jarrow, R. A., D. Lando, and S. M. Turnbull. 1997. A Markov model for the term structure

of credit spreads. Review of Financial Studies, 10.

Jarrow, R. A., and S. M. Turnbull. 1995. Pricing Derivatives on Financial Securities Subject

to Credit Risk. Journal of Finance, 50.

Lando, D. 1998. On Cox Processes and Credit Risky Securities. Review of Derivatives

Research, 2.

Lando, D. 2004. Credit Risk Modeling Theory and Applications. Princeton University

Press.

Löfﬂ er, G. 2004. An Anatomy of Rating through the Cycle. Journal of Banking and

Finance, 28.

Löfﬂ er, G. 2005. Avoiding the Rating Bounce: Why Rating Agencies Are Slow to React to

New Information. Journal of Economic Behavior and Organization, 56.

1106 Selected References

Merton, R. 1974. On the Pricing of Corporate Debt: The Risk Structure of Interest Rates.

Journal of Finance, 22.

Moody’s Special Report. 1992. Corporate Bond Defaults and Default Rates. Moody’s Inves-

tors Service.

Nelson, C., and A. Siegel. 1987. Parsimonious Modeling of Yield Curves. Journal of Busi-

ness, 60.

Standard & Poor’s. Rating Transitions 2004: U.S. CMBS Upgrades Overwhelm Downgrades

Amid Improved Real Estate Fundamentals. http://www2.standardandpoors.com/spf/pdf/

ﬁ xedincome/RatingTransitionsCMBS04.pdf?vregion=apandvlang=en.

Walder, R. 2002. A Historical Primer on the Business of Credit Ratings: Modeling the Joint

Dynamics of Default-Free and Defaultable Bond Term Structures. Research Paper No. 26,

November.

Yu, F. 2002. Modeling Expected Return on Defaultable Bonds. Journal of Fixed Income,

122.

Chapter 29: Random Numbers

Abramowitz, M., and I. A. Stegun. 1965. Handbook of Mathematical Functions. Dover.

Box, G. E. P, and M. E. Muller. 1958. A Note on the Generation of Random Normal Devi-

ates. Annals of Mathematical Statistics, 29.

Knuth, D. E. 1981. The Art of Computer Programming, vol. 2: SemiNumerical Algorithms.

Addison-Wesley.

D. H. Lehmer. 1951. Mathematical Methods in Large-Scale Computing Units. Proceedings

of the Second Symposium on Large-Scale Digital Calculating Machinery, 26. Annals of the

Computational Laboratory of Harvard University, Harvard University Press.

Index

AAR (average abnormal return), 387, 389

Abandonment option, 653–659

with equipment sale, 655–656

state prices with, 654, 656–659

value enhancement with, 655

valuing as series of puts of, 659–661

valuing of project for, 654

Abnormal returns (AR), 371, 374

average, 387, 389

cumulative, 371, 374

examples of, 386–389, 393

examples of, 378–379, 393

Abs function (Excel), 326

Absolute value, of array of numbers, 326

Accelerated depreciation, 131–133,

163–167

Accounts payable (A/P), intangibles in, 136

Accrued interest, on bonds, 731–732

Activate method (VBA), 1021

ActiveCell object (VBA), 975–979

Add-in(s), 1008–1013

converting workbook to, 1008–1010

installing and using, 1011–1013

Add-ins function (Excel), 802–803

Addition, of matrices, 776

Address property, of ActiveCell object,

976–977

Alpha (α), of assets, 322

American call options, pricing of, 435

American options, 422

binomial option-pricing model for,

455–458

VBA function in, 460–463

Ampersand (&) operator (VBA), 932,

1060

AndDemo function (VBA), 902–903

Annual returns, 258–259

Annuity

present value of, 7–9

AnnuityValue function (Excel), 684–686

A/P (accounts payable), intangibles in, 136

Application.Combin function (Excel), in

VBA, 885

Application.NormSDist function (VBA),

in Black-Scholes model, 512

AR. See Abnormal returns (AR).

Areas property (VBA), 1024

Array(s) (VBA), 941–971

assignment of, 959–960

data tables as, 770

dynamic, 948–958

explicitly declared index boundaries for,

944–945

For Each statement with, 985–986

LBound and UBound functions for,

943–944

multidimensional, 946–948

Option Base statement for, 945–946

overview of, 941

as parameters to functions, 963–970

ReDim Preserve statement for, 949, 950,

953–958

ReDim statement for, 948–953

simple, 941–946

variants containing, 960–962

from worksheet, 969–970

Array formulas (Excel), with matrices,

833–838

Array function(s) (Excel), 825–832

built-in, 825–829

for computing, 832

of compound annual return, 830–831

of par yields, 716

entry into spreadsheets of, 825

Frequency as, 828–829

homemade, 830–832

MMult and MInverse as, 828

overview of, 825

Transpose as, 825–827

Array of numbers, absolute value of,

326

ArrayAssign macro (VBA), 959–960

As (VBA), for function type, 895

Asian option(s)

examples of, 626f, 627f

Monte Carlo pricing of, 625–638

initial example of, 627–632

with more periods, 636–638

price paths in, 628–631

VBA program for, 633–638

payoff of, 613, 625

types of, 625

usefulness of, 625

Asset(s)

alpha of, 322

beta of, 318–320

in ﬁ nancial modeling, 136

Asset residual value, in lease analysis,

212–214

Asset returns, for value at risk, 403–404

Asset values, implicit puts and, 592–593

At the money option, 422

AutoSum button (Excel), 1094

Note: Page numbers followed by f indicate ﬁ gures; those followed by t indicate tables.