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Local risk-minimization under transaction costs

Lamberton, Damien; Pham, Huyên; Schweizer, Martin - 1998

We propose a new approach to the pricing and hedging of contingent claims under transaction costs in a general incomplete market in discrete time. Under the assumptions of a bounded mean-variance tradeoff, substantial risk and a nondegeneracy condition on the conditional variances of asset...

Persistent link: https://www.econbiz.de/10009576212

Additional logarithmic utility of an insider

Amendinger, Jürgen; Imkeller, Peter; Schweizer, Martin - 1998

In this paper, we consider a security market in which two investors on different information levels maximize their expected logarithmic utility from terminal wealth. While the ordinary investor's portfolio decisions are based on a public information flow, the insider possesses from the beginning...

Persistent link: https://www.econbiz.de/10009577457

A note on stochastic volatility, GARCH models, and hyperbolic distributions

Jaschke, Stefan R. - 1997

We establish a relation between stochastic volatility models and the class of generalized hyperbolic distributions. These distributions have been found to fit exceptionally well to the empirical distribution of stock returns. We review the background of hyperbolic distributions and prove...

Persistent link: https://www.econbiz.de/10009577459

A minimality property of the minimal martingale measure

Schweizer, Martin - 1998

Let X be a continuous adapted process for which there exists an equivalent local martingale measure (ELMM). The minimal martingale measure P is the unique ELMM for X with the property that local P-martingales strongly orthogonal to the P-martingale part of X are also local P-martingales. We...

Persistent link: https://www.econbiz.de/10009578560

Higher order forward rate agreements and the smoothness of the term structure

Jaschke, Stefan R. - 1998

This paper proposes linear higher order conditions on the term structure that allow to compute valuation bounds for any deterministic cash stream. Starting from bounds on the forward rate curve and its derivatives, which are nonlinear in the discount factors, we derive linear conditions that are...

Persistent link: https://www.econbiz.de/10009579185

Coherent risk measures, valuation bounds, and (my,p)-portfolio optimization

Jaschke, Stefan R.; Küchler, Uwe - 1999

This paper presents a general theory that works out the relation between coherent risk measures, valuation bounds, and … theory presented seems to fill a gap between arbitrage valuation on the one hand and single agent utility maximization or … full-fledged equilibrium theory on the other hand. "Coherent" valuation bounds strike a balance in that the bounds can be …

Persistent link: https://www.econbiz.de/10009581108

A guided tour through quadratic hedging approaches

Schweizer, Martin - 1999

This paper gives an overview of results and developments in the area of pricing and hedging contingent claims in an incomplete market by means of a quadratic criterion. We first present the approach of risk-minimization in the case where the underlying discounted price process X is a local...

Persistent link: https://www.econbiz.de/10009582411

Quantile-VaR is the wrong measure to quantify market risk for regulatory purposes

Jaschke, Stefan R. - 2001

Starting from the objective of banking supervision - to minimize the overall costs of banking to the general public - we show that the current standard of quantifying market risk is flawed. It is perfectly aligned with the interests of banks' shareholders and management, but not with the...

Persistent link: https://www.econbiz.de/10009614286

The Cornish-Fisher-Expansion in the context of Delta - Gamma - Normal approximations

Jaschke, Stefan R. - 2001

Qualitative and quantitative properties of the Cornish-Fisher-Expansion in the context of Delta-Gamma-Normal approaches to the computation of Value at Risk are presented. Some qualitative deficiencies of the Cornish-Fisher-Expansion - the monotonicity of the distribution function as well as...

Persistent link: https://www.econbiz.de/10009614287

Mean-variance hedging for continuous processes : new proofs and examples

Pham, Huyên; Rheinländer, Thorsten; Schweizer, Martin - 1997

Persistent link: https://www.econbiz.de/10009632600