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Closed form representations for the minimal hedging portfolios of American type contingent claims

Vishnyakov, A. N.; Kramkov, D.O. - University of Bonn, Germany - 1994

In the framework of the classical Black and Scholes model of security market we present the explicit formulas of the minimal hedging portfolios for a number of reward processes of the ``classical'', lookback and Asian type. These results complement the solutions previously received by Mc~Kean,...

Persistent link: https://www.econbiz.de/10004968196

Pseudo--Arbitrage - A new Approach to Pricing and Hedging in Incomplete Markets

Sommer, Daniel - University of Bonn, Germany - 1998

possible in an incomplete markets framework the no--arbitrage arguments that have been developed in complete markets leads us … to defining the concept of pseudo--arbitrage. Building on this concept we are able to extend the no--arbitrage idea to a …

Persistent link: https://www.econbiz.de/10004968199

An Experimental Investigation of the Option Pricing Approach

Abbink, Klaus; Kuon, Bettina - University of Bonn, Germany - 1996

values the option with his arbitrage free price, which is independent of the probability of the stock movement. The … experimental data show that the traiders learn to exploit more arbitrage as they gain experience, however, they value the option by … probability values. Nevertheless, there are hints for learning towards the arbitrage free price, driven by the expected payoff …

Persistent link: https://www.econbiz.de/10004968214

On Short Rate Processes and Their Implications for Term Structure Movements

Schl; oumlgl, Erik; Sommer, Daniel - University of Bonn, Germany - 1994

We compare short rate diffusion models with respect to their implications for term structure movements, the plausiblity of which serves us as a criterion for evaluating the models. Analytically for Gauss-Markov models and numerically for a broader collection of models prevalent in the...

Persistent link: https://www.econbiz.de/10004968248

The Term Structure of Defaultable Bond Prices

Sch; oumlnbucher, Philipp J. - University of Bonn, Germany - 1996

defaultable bonds and give conditions under which these dynamics are arbitrage-free. These conditions are a drift restriction that …

Persistent link: https://www.econbiz.de/10004968256

The Direct Approach to Debt Option Pricing

Sandmann, K.; Sandmann, K. - University of Bonn, Germany - 1995

We review the continuous--time literature on the so-- called direct approach to bond option pricing. Going back to Ball and Torous (1983), this approach models bond price processes directly (i.e. without reference to interest rates or state variable processes) and applies methods that Black and...

Persistent link: https://www.econbiz.de/10004968258

Closed Form Term Structure Derivatives in a Heath-Jarrow- Morton Model with Log-Normal Annually Compounded Interest Rates

Sondermann, D.; Miltersen, K. - University of Bonn, Germany - 1994

Starting with observable annually compounded forward rates we derive a term structure model of interest rates. The model relies upon the assumption that a specific set of annually compounded forward rates is log-normally distributed. We derive solutions for interest rate caps and floors as well...

Persistent link: https://www.econbiz.de/10004968277

An Options Pricing Experiment with Professional Traders

Abbink, Klaus; Kuon, Bettina - University of Bonn, Germany

that professional traders achieve lower arbitrage exploitation as well as lower expected payoffs, as a consequence of …

Persistent link: https://www.econbiz.de/10004968286

Arbitrage,bubbles and valuation

Werner, Jan - University of Bonn, Germany

Persistent link: https://www.econbiz.de/10004968293

A Systematic Approach to Pricing and Hedging of International Derivatives with Interest-Rate Risk

Frey, Rüdiger; Sommer, Daniel - University of Bonn, Germany - 1995

We deal with the valuration and hedging of non path-dependent European options on one or several underlyings in a model of an international economy which allows for both interest rate and exchange rate risk. Using martingale theory we provide a unified and easily applicable approach to pricing...

Persistent link: https://www.econbiz.de/10004968300