Validity of capital asset pricing model: evidence from Karachi stock exchange

This study investigates the validity of Capital Asset Pricing (CAP) Model in Karachi stock exchange (KSE). The data of 387 companies of 30 different sectors on monthly, quarterly and semiannual basis are used. The Paired sample t- test is applied to find the difference between actual and expected returns. Results show that capital asset pricing model (CAPM) predict more accurately the expected return on a short term investment as compare to long term investment. It is recommended that the investors should more focus on CAPM results for short term as compare to long term investments in KSE.Portfolio choice, Investment Decisions, Capital Assets Pricing Model, Risk

Applying fuzzy parametersin pricing financial derivatives inspiredby the kyoto protocol

The emission trading is proposed in the Kyoto Protocol. An appropriate market and the market of financial derivatives for allowances will be established. Using the neutral martingale method and Monte Carlo simulations, we propose a stochastic model with a pricing formula, which may be useful for an evaluation of derivatives inspired by the Kyoto Protocol.option pricing, financial derivatives, Kyoto Protocol, martingale method, fuzzy parameters

The Unregulables? The Perilous Confluence of Hedge Funds and Credit Derivatives

This Note examines credit derivatives, hedge funds, and the increase in systemic risk that results from the combination of the two. The issues considered include what method of regulation--entity, transaction, or self-regulation--provides the form and amount of disclosure that best addresses the risk that the markets as a whole will be affected by a financial shock. Emphasizing the role of traders and efficient capital markets, this Note proposes that a system of disclosure for derivatives similar to the Trade Reporting and Compliance Engine, or TRACE, system for corporate bonds would prevent rapid repricings that have the potential to shock the financial system

The Unregulables? The Perilous Confluence of Hedge Funds and Credit Derivatives

This Note examines credit derivatives, hedge funds, and the increase in systemic risk that results from the combination of the two. The issues considered include what method of regulation--entity, transaction, or self-regulation--provides the form and amount of disclosure that best addresses the risk that the markets as a whole will be affected by a financial shock. Emphasizing the role of traders and efficient capital markets, this Note proposes that a system of disclosure for derivatives similar to the Trade Reporting and Compliance Engine, or TRACE, system for corporate bonds would prevent rapid repricings that have the potential to shock the financial system

A Dynamic Incentive Mechanism for Transmission Expansion in Electricity Networks: Theory, Modeling, and Application

We propose a price-cap mechanism for electricity-transmission expansion based on redefining transmission output in terms of financial transmission rights. Our mechanism applies the incentive-regulation logic of rebalancing a two-part tariff. First, we test this mechanism in a three-node network. We show that the mechanism intertemporally promotes an investment pattern that relieves congestion, increases welfare, augments the Transco´s profits, and induces convergence of prices to marginal costs. We then apply the mechanism to a grid of northwestern Europe and show a gradual convergence toward a common-price benchmark, an increase in total capacity, and convergence toward the welfare optimum.Electricity transmission expansion, incentive regulation