CONTENTS -- Preface -- Program -- Risk Sensitive Investment Management with Affine Processes: A Viscosity Approach M. Davis and S. Lleo -- Keywords: -- 1. Introduction -- 2. Analytical Setting -- 2.1 Overview -- 2.2 Factor Dynamics -- 2.3 Asset Market Dynamics -- 2.4 Portfolio Dynamics -- 3. Problem Setup -- 3.1 Optimization Criterion -- 3.2 Change of Measure -- 3.3 The HJB Equation -- 4. Properties of the Value Function -- 4.1 "Zero Beta" Policies -- 4.2 Convexity -- 4.3 Boundedness -- 4.4 Growth -- 5. Viscosity Solution Approach -- 5.1 Definitions -- 5.2 Characterization of the Value Function as a Viscosity Solution -- 6. Comparison Result -- 6.1 Uniqueness -- 7. Conclusion -- References -- Small-Sample Estimation of Models of Portfolio Credit Risk M. B. Gordy and E. Heitfield -- Keywords: -- 1. Introduction -- 2. A Structural Default Model -- 3. Moment and Maximum Likelihood Estimators -- 4. Monte Carlo Simulations -- 5. Bias in Method of Moments -- Conclusion -- Appendices -- References -- Heterogeneous Beliefs with Mortal Agents A. A. Brown and L. C. G. Rogers -- 1. Introduction -- 1.1 Literature Review -- 2. The Model -- 2.1 The Dividend Process -- 2.2 The Agents -- 2.3 Deriving the State Price Density -- 2.4 A Continuum of Agents -- 3. Asset Prices -- 3.1 The Interest Rate Process -- 3.2 The Stock Price -- 3.2.1 A PDE for the stock price -- 3.2.2 Calculation of stock price via computation of conditional expectation -- 3.2.3 Solving the ODEs -- 3.3 The Bond Price -- 3.4 Remarks on the Case in which a is Known -- 4. Numerical Results -- 4.1 Comments on Results -- 5. Conclusions -- Appendices. Stochastic Integrals -- References -- Counterparty Risk on a CDS in a Markov Chain Copula Model with Joint Defaults S. Crepey, M. Jeanblanc and B. Zargari -- Keywords: -- 1. Introduction -- 1.1 Counterparty Credit Risk -- 1.2 A Markov Copula Approach.

1.3 Outline of the Paper -- 2. General Set-Up -- 2.1 Cash Flows -- 2.2 Pricing -- 2.3 Special Case F = H -- 3. Markov Copula Factor Set-Up -- 3.1 Factor Process Model -- 3.2 Pricing -- 3.3 Hedging -- 3.3.1 Price dynamics -- 3.3.2 Min-variance hedging -- 4. Implementation -- 4.1 Affine Intensities Model Specification -- 4.1.1 Calibration issues -- 4.1.2 Special case of constant intensities -- 4.2 Numerical Results -- 5. Concluding Remarks and Perspectives -- Appendix. -- References -- Portfolio Efficiency Under Heterogeneous Beliefs X.-Z. He and L. Shi -- Keywords: -- 1. Introduction -- 2. MV Equilibrium Asset Prices Under Heterogeneous Beliefs -- 2.1 Heterogeneous Beliefs -- 2.2 Consensus Belief and Equilibrium Asset Prices -- 2.3 The Zero-Beta CAPM Under Heterogeneous Beliefs -- 3. The Impact of Heterogeneity -- 3.1 The Shadow Prices and the Aggregation Property -- 3.2 The Impact of Heterogeneous ARA Coefficients -- 3.3 The Impact of Heterogeneous Expected Payoffs -- 4. MV Efficiency and Geometric Relationship of MV Frontiers -- 4.1 MV Efficiency of the Optimal Portfolios Under Heterogeneous Beliefs -- 4.2 The Relation of the Equilibrium MV Frontiers without Risk-Free Asset -- 5. The Impact of Heterogeneity on the Market with Many Investors -- 6. Conclusion -- Appendices -- References -- Security Pricing with Information-Sensitive Discounting A. Macrina and P. A. Parbhoo -- Keywords: -- 1. Introduction -- 2. Information-Sensitive Pricing Kernels -- 3. Weighted Heat Kernel Models -- 4. Credit-Risky Discount Bonds -- 5. Credit-Risky Bonds with Continuous Market-Dependent Recovery -- 6. Call Option Price Process -- 7. Hybrid Securities -- 8. Credit-Risky Coupon Bonds -- 9. Credit-Sensitive Pricing Kernels -- References -- On Statistical Aspects in Calibrating a Geometric Skewed Stable Asset Price Model H. Masuda -- Keywords: -- 1. Introduction.

2. Setup -- 3. Description of Estimation Procedure -- 3.1 Preliminaries -- 3.1.1 Expression of empirical-sign statistics -- 3.1.2 Expression of normalized MPV -- 3.1.3 A basic limit result -- 3.2 Joint Asymptotic (Mixed) Normality -- 3.4 Case (B): Time-Varying Scale Process -- 4. Simulation Experiments -- 4.1 Case (A) -- 4.2 Case (B) -- 5. Concluding Remarks -- References -- A Note on a Statistical Hypothesis Testing for Removing Noise by the Random Matrix Theory and Its Application to Co-Volatility Matrices Morimoto and K. Tachibana -- Keywords: -- 1. Introduction -- 2. Theoretical Background -- 2.1 Random matrix -- 2.2 Extraction of Essential Volatility -- 2.3 Maximum Eigenvalue Density of Random Matrix -- 2.4 Realized Quantities -- 3. Empirical Analysis -- 4. Concluding Remarks -- References -- Quantile Hedging for Defaultable Claims Y. Nakano -- Keywords: -- 1. Introduction -- 2. Model -- 3. Quantile Hedging Problem -- 4. Case of Non-Zero Recovery Rate -- References -- New Unified Computational Algorithm in a High-Order Asymptotic Expansion Scheme K. Takehara, A. Takahashi and M. Toda -- Keywords: -- 1. Introduction -- 2. An Asymptotic Expansion Approach in a Black-Scholes Economy -- 2.1 An Asymptotic Expansion Approach in a Black-Scholes Economy -- 2.2 An Approach with an Expansion into Iterated It Integrals -- 2.3 An Alternative Approach with a System of Ordinary Differential Equations -- 3. Numerical Examples -- 3.1 -SABR Model -- 3.2 Currency Option under a Libor Market Model of Interest Rates and a Stochastic Volatility of a Spot Exchange Rate -- 3.2.1 Cross-Currency Libor Market Models -- 3.2.2 Numerical Examples -- 4. Concluding Remarks -- References -- Can Financial Synergy Motivate M&A? Y. Tian, M. Nishihara and T. Shibata -- 1. Introduction -- 2. Model Setup -- 3. Model Analysis -- 3.1 After M&A -- 3.2 BeforeM&A.

4. Model Implications -- 4.1 Measure of Financial Synergy -- 4.2 Main Results -- 5. Conclusions -- Appendix A -- Appendix B -- References.