Designing an investment strategy in transition economies is a difficult task because stock-markets opened through time, time series are short, and there is little guidance how to obtain expected returns and covariance matrices necessary for mean-variance portfolio allocation. Also, structural...

We analyse the conditional versions of two closely connected mean-variance investment problems, the replication of a contingent claim on the one hand and the selection of an efficient portfolio on the other hand, in a general discrete time setting with incomplete markets. <p> We exhibit a positive...</p>

Testing the hypothesis that international equity market correlation increases in volatile times is a difficult exercise and misleading results have often been reported in the past because of a spurious relationship between correlation and volatility. This paper focuses on extreme correlation,...

Correlation in international equity returns is unstable over time. It has been suggested that the international correlation of large stock returns, especially negative ones, differs from that of usual returns. It is in periods of extreme negative returns that the benefits of international risk...

In this study we re-examine the pricing of equity and the risk incentives of shareholders in levered firms. We derive a down-and-out call equity valuation model which rests on the assumption that shareholders choose the optimal investment and asset returns' volatility as a function of current...

By focusing on the highly innovative retail market for structured products, we investigate the drivers of financial complexity. We perform a lexicographic analysis of the term sheets of 55,000 retail structured products issued in Europe since 2002. We observe that financial complexity has been...

In this paper, we use the investment fraud of Bernard Madoff to inquire into the production of trust in the context of financial markets. Drawing upon empirical data related to U.S. individual investors (interviews and letters) as well as documentary material, we investigate the mechanisms...

In this paper, the authors introduce a form of pre-play communication that we call "preopening". During the preopening, players announce their tentative actions to be played in the underlying game. Announcements are made using a posting system which is subject to stochastic failures. Posted...

This paper provides a survey of recent changes in the market microstructure of the 5 largest European Stock Exchanges. We first provide a brief statistical overview of European equity markets. Then we discuss how the introduction of the Investment Services Directive and the development of...

We consider information sharing between traders("floor brokers") who possess different types of information, namely information on the payoff of a risky security or information on the volume of liquidity trading in this security. We interpret these traders as dual -capacity brokers on the floor...