Let S=(S_t), t=0,1,...,T (T being finite), be an adapted R^d-valued process. Each component process of S might be interpreted as the price process of a certain security. A trading strategy H=(H_t), t= 1,...,T, is a predictable R^d-valued process. A strategy H is called extreme if it represents a...

Pricing and hedging of long-term interest rate sensitive products require to extrapolate the term structure beyond observable maturities. For the resulting limiting term structure we show two results by postulating no arbitrage in a bond market with infinitely increasing maturities: long...

Within the structural approach for credit risk models we discuss the optimal exercise of the callable and convertible bonds. The Vasi˘cek–model is applied to incorporate interest rate risk into the firm’s value process which follows a geometric Brownian motion. Finally, we derive pricing...

Minimum-cost portfolio insurance is an investment strategy that enables an investor to avoid losses while still capturing gains of a payoff of a portfolio at minimum cost. If derivative markets are complete, then holding a put option in conjunction with the reference portfolio provides...

This paper provides a statistical analysis of high-frequency recordings of the German share price index DAX. The data set extends from November 1988 to the end of the year 1995 and includes all minute-to-minute changes during trading hours at the Frankfurt Stock Exchange. The focus of this study...

It is shown that moments of negative order as well as positive non- integral order of a nonnegative random variable X can be expressed by the Laplace transform of X. Applying these results of certain first passage times gives explicit formulae for moments of suprema of Bessel processes as well...

We present a stochastic simulation model of a prototype financial market. Our market is populated by both noise traders and fundamentalist speculators. The dynamics covers switches in the prevailing mood among noise traders (optimistic or pessimistic) as well as switches of agents between the...

If calibrated to an observed term structure of interest rates that only covers a finite range of times-to-maturity an HJM-model of the term structure of interest rates will eventually die out in finite time as bonds reach maturity. This poses problems for the pricing and hedging of certain...