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A Stochastic Approach to the Valuation of Barrier Options in Heston's Stochastic Volatility Model

Griebsch, Susanne; Pilz, Kay - Finance Discipline Group, Business School - 2012

In the valuation of continuous barrier options the distribution of the first hitting time plays a substantial role. In general, the derivation of a hitting time distribution poses a mathematically challenging problem for continuous but otherwise arbitrary boundary curves. When considering...

Persistent link: https://www.econbiz.de/10010752818

Long Memory, Heterogeneity and Trend Chasing

He, Xue-Zhong; Li, Youwei - Finance Discipline Group, Business School - 2005

Long-range dependence in volatility is one of the most prominent examples of applications in financial market research involving universal power laws. Its characterization has recently spurred attempts at theoretical explanation of the underlying mechanism. This paper contributes to this recent...

Persistent link: https://www.econbiz.de/10004984561

Liability Driven Investments under a Benchmark Based Approach

Baldeaux, Jan; Platen, Eckhard - Finance Discipline Group, Business School - 2013

In this paper, we present an alternative approach as a suitable framework under which liability driven investments can be valued and hedged. This benchmark approach values both assets and liabilities consistently under the real world probability measure using the best performing portfolio, the...

Persistent link: https://www.econbiz.de/10010883496

Heterogeneous Expectations in Asset Pricing:Empirical Evidence from the S&P500

Chiarella, Carl; He, Xue-Zhong; Zwinkels, Remco C.J. - Finance Discipline Group, Business School - 2014

This paper empirically assesses heterogeneous expectations in asset pricing. We use a maximum likelihood approach on S&P500 data to estimate a structural model. Our empirical results are consistent with a market populated with fundamentalists and chartists. In addition, agents switch between...

Persistent link: https://www.econbiz.de/10010883504

The Relationship Between Uncertainty and the Market Reaction to Information: How is it Influenced by Market and Stock-Specific Characteristics?

Bird, Ron; Reddy, Krishna; Yeung, Danny - Finance Discipline Group, Business School - 2011

Numerous empirical studies dating back to Ball and Brown (1968) have investigated how markets react to the receipt of new information. However, it is only recently that authors have focussed on differentiating between, and learning from, how investors react to good and bad news. In this paper we...

Persistent link: https://www.econbiz.de/10009493157

Heterogeneous Expectations and Speculative Behaviour in a Dynamic Multi-Asset Framework

Chiarella, Carl; Dieci, Roberto; He, Xue-Zhong - Finance Discipline Group, Business School - 2005

Following the framework of a one risky - one riskless asset model developed by Brock and Hommes (1998), this paper considers a discrete-time model of a financial market where heterogeneous groups of agents allocate their wealth amongst multiple risky assets and a riskless asset. Agents follow...

Persistent link: https://www.econbiz.de/10004984536

Credit Derivative Evaluation and CVA under the Benchmark Approach

Baldeaux, Jan; Platen, Eckhard - Finance Discipline Group, Business School - 2013

In this paper, we discuss how to model credit risk under the benchmark approach. Firstly we introduce an affine credit risk model. We then show how to price credit default swaps (CDSs) and introduce credit valuation adjustment (CVA) as an extension of CDSs. In particular, our model can capture...

Persistent link: https://www.econbiz.de/10010754094

The Affine Nature of Aggregate Wealth Dynamics

Platen, Eckhard; Rendek, Renata - Finance Discipline Group, Business School - 2012

The paper derives a parsimonious two-component affine diffusion model for a world stock index to capture the dynamics of aggregate wealth. The observable state variables of the model are the normalized index and the inverse of the stochastic market activity, both modeled as square root...

Persistent link: https://www.econbiz.de/10010754096

Modeling of Oil Prices

Du, Ke; Platen, Eckhard; Rendek, Renata - Finance Discipline Group, Business School - 2012

The paper derives a parsimonious two-component affine diffusion model with one driving Brownian motion to capture the dynamics of oil prices. It can be observed that the oil price behaves in some sense similarly to the US dollar. However, there are also clear differences. To identify these the...

Persistent link: https://www.econbiz.de/10010754099

Modelling Co-movements and Tail Dependency in the International Stock Market via Copulae

Ignatieva, Katja; Platen, Eckhard - Finance Discipline Group, Business School - 2009

This paper examines international equity market co-movements using time-varying copulae. We examine distributions from … Student-t assumption on marginals leads to the best performance, and thus, can be used to fit multivariate copula for the … joint distribution of equity index returns. We show in our study that the Student-t copula is not only superior to the …

Persistent link: https://www.econbiz.de/10008492108