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Author:Abken, Peter A. 

Journal Article
The role of currency derivatives in internationally diversified portfolios

Diversification is widely practiced by investors seeking to reduce risk. In recent years investors have been turning to foreign markets to obtain even greater scope for diversification than domestic markets offer. With the internationalization of security portfolios, however, also comes an additional risk-foreign exchange risk. ; The use of currency derivatives in internationally diversified portfolios can help mitigate foreign exchange risk. This article investigates the impact of currency hedging on these portfolios, in particular index portfolios of stocks and bonds from markets in seven ...
Economic Review , Volume 82 , Issue Q 3 , Pages 34-59

Working Paper
Pricing S&P 500 index options using a Hilbert space basis

This paper tests the approach of Madan and Milne (1994) and its extension in Abken, Madan, and Ramamurtie (1996) for pricing contingent claims as elements of a separable Hilbert space. We specialize the Hilbert space basis to the family of Hermite polynomials and test the model on S&P 500 index options. Restrictions on the prices of Hermite polynomial risk are imposed that allow all option maturity classes to be used in estimation. These restrictions are rejected by our empirical tests of a four-parameter specification of the model. Nevertheless, the unrestricted four-parameter model, based ...
FRB Atlanta Working Paper , Paper 96-21

Working Paper
Generalized method of moments estimation of Heath-Jarrow-Morton models of interest-rate contingent claims

FRB Atlanta Working Paper , Paper 94-8

Journal Article
Innovations in modeling the term structure of interest rates

Economic Review , Issue Jul , Pages 2-27

Journal Article
Corporate pensions and government insurance: deja vu all over again?

Economic Review , Issue Mar , Pages 1-16

Working Paper
Generalized method of moments tests of forward rate processes

FRB Atlanta Working Paper , Paper 93-7

Journal Article
Over-the-counter financial derivatives: risky business?

Economic Review , Volume 79 , Issue Mar , Pages 1-22

Journal Article
Interest-rate caps, collars, and floors

Economic Review , Issue Nov , Pages 2-25

Journal Article
Options and volatility

Because volatility of the underlying asset price is a critical factor affecting option prices and hedge ratios, the modeling of volatility and its dynamics is of vital interest to traders, investors, and risk managers. This modeling is a difficult task because the path of volatility during the life of an option is highly unpredictable. There has been a proliferation of volatility specifications since the original, simple constant-volatility assumption of the famous Black and Scholes option pricing model. This article gives an overview of different specifications of asset price volatility that ...
Economic Review , Volume 81 , Issue Dec , Pages 21-35

Working Paper
The impact of a dealer's failure on OTC derivatives market liquidity during volatile periods

This paper develops a model in which information losses may be an important part of the cost of an OTC derivatives dealer's failure. A dealer failure forces solvent counterparties of a failed dealer to seek replacement hedges with other dealers. However, by forcing good firms into the derivatives market, the failure provides camouflage for insolvent firms seeking to speculate with a dealer that does not know their credit status. The paper models this information loss and uses the model to quantitatively evaluate a range of scenarios. The results suggest that a market breakdown is unlikely but ...
FRB Atlanta Working Paper , Paper 96-6

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