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Weak Convergence of Hedging Strategies of Contingent Claims

Prigent, Jean-Luc; Scaillet, Olivier - Institut für Schweizerisches Bankwesen <Zürich>; … - 2002

This paper presents results on the convergence for hedging strategies in the setting of incomplete financial markets … trading strategy, when perfect hedging of contingent claims is infeasible, is robust under weak convergence. Several …

Persistent link: https://www.econbiz.de/10005859330

Dynamic utility indifference valuation via convex risk measures

Klöppel, Susanne; Schweizer, Martin - Institut für Schweizerisches Bankwesen <Zürich> - 2005

We study the dynamic utility indifference value process p(X) when the usefulness of X is evaluated via a dynamic monetary concave utility functional (DMCUF) instead of von Neumann/Morgenstern expected utility. A DMCUF is minus a dynamic convex risk measure. The key tools for our investigations...

Persistent link: https://www.econbiz.de/10005858886

Risk Minimization in Stochastic Volatility Models: Model Risk and Empirical Performance

Poulsen, Rolf; Schenk-Hoppé, Klaus Reiner; Ewald, … - Institut für Schweizerisches Bankwesen <Zürich> - 2007

In this paper the performance of locally risk-minimizing hedge strategies for European options in stochastic volatility models is studied from an experimental as well as from an empirical perspective. These hedge strategies are derived for a large class of diffusion-type stochastic volatility...

Persistent link: https://www.econbiz.de/10005858246

Difference in Beliefs and Currency Options Markets

Beber, Alessandro; Breedon, Francis; Buraschi, Andrea - Institut für Schweizerisches Bankwesen <Zürich> - 2007

This paper investigates the impact of heterogeneous beliefs of professional investors on the currency options market. Using a unique data set with detailed information on the foreign-exchange forecasts of about 50 market participants over more than ten years, we construct an empirical proxy for...

Persistent link: https://www.econbiz.de/10005858023

Closed-form solutions for European and Digital calls in the Hull and White stochastic volatility model and their relation to locally R-minimizing and Delta hedges

Ewald, Christian-Oliver; Schenk-Hoppé, Klaus Reiner; … - Institut für Schweizerisches Bankwesen <Zürich> - 2006

This paper derives an analytic expression for the distribution of the average volatility in the stochastic volatility model of Hull and White. This result answers a longstanding question, posed by Hull and White (Journal of Finance 42, 1987), whether such an analytic form exists. Our findings...

Persistent link: https://www.econbiz.de/10005858327

Arbitrage Pricing Simplified

Kallio, Markku; Ziemba, William T. - Institut für Schweizerisches Bankwesen <Zürich>; … - 2003

This paper derives fundemental arbitrage pricing results in finite dimensions in a simple unified framework using Tucker's theorem of the alternative. Frictionless results plus those with dividends, periodic interest payments, transaction costs, different interest rates for lending and...

Persistent link: https://www.econbiz.de/10005858412

Aversion Analysis

Allard, Marie; Bronsard, Camille; Gourieroux, Christian - Institut für Schweizerisches Bankwesen <Zürich>; … - 2002

Due to their underlying assumptions, the standard concepts of risk aversion and preference for the present are generally defined separately and represented by scalar measures, and this implies many shortcomings. More specifically, if measured by a scalar, the risk aversion remains unchanged,...

Persistent link: https://www.econbiz.de/10005858445

Correlation Risk and Optimal Portfolio Choice

Buraschi, Andrea; Porchia, Paolo; Trojani, Fabio - Institut für Schweizerisches Bankwesen <Zürich> - 2007

optimal portfolio demand for hedging correlation risk. We calibrate the model and find that the optimal demand to hedge … correlation risk is a non-negligible fraction of the myopic portfolio, which often dominates the pure volatility hedging demand …. The hedging demand for correlation risk is larger in settings with high average correlations and correlation variances …

Persistent link: https://www.econbiz.de/10005858523

Arbitrage opportunities in diverse markets via a non-equivalent measure change

Osterrieder, Jörg; Rheinländer, Thorsten - Institut für Schweizerisches Bankwesen <Zürich> - 2004

We study arbitrage opportunities in diverse markets as introduced by R. Fernholz in [2]. By a change of measure technique we are able to generate a variety of diverse markets. The construction is based on an absolutely continuous but non-equivalent measure change which implies the existence of...

Persistent link: https://www.econbiz.de/10005858729

Evolutionary Stable Stock Markets

Hens, Thorsten; Schenk-Hoppe, Klaus Reiner; Evstigneev, Igor - Institut für Schweizerisches Bankwesen <Zürich>; … - 2003

This paper shows that a stock market is evolutionary stable if andonly if stocks are evaluated by expected relative dividends. Any othermarket can be invaded by portfolio rules that will gain market wealthand hence change the valuation. In the model the valuation of assetsis given by the wealth...

Persistent link: https://www.econbiz.de/10005858757