We present an algorithm for moment-matching scenario generation. This method produces scenarios and corresponding probability weights that match exactly the given mean, the covariance matrix, the average of the marginal skewness and the average of the marginal kurtosis of each individual...

The optimal-exercise policy of an American option dictates when the option should be exercised. In this paper, we consider the implications of missing the optimal exercise time of an American option. For the put option, this means holding the option until it is deeper in-the-money when the...

This paper shows that tests of Random Number Generators (RNGs) may be used to test the Efficient Market Hypothesis (EMH). It uses the Overlapping Serial Test (OST), a standard test in RNG research, to detect anomalous patterns in the distribution of sequences of stock market movements up and...

Recent advances in Stein’s lemma imply that under elliptically symmetric distributions all rational investors will select a portfolio which lies on Markowitz’ mean–variance efficient frontier. This paper describes extensions to Stein’s lemma for the case when a random vector has the...

This paper deals with a multi-period portfolio selection problem with fuzzy returns. A possibilistic mean-semivariance-entropy model for multi-period portfolio selection is presented by taking into account four criteria viz., return, risk, transaction cost and diversification degree of...

Many of the different numerical techniques in the partial differential equations framework for solving option pricing problems have employed only standard second-order discretization schemes. A higher-order discretization has the advantage of producing low size matrix systems for computing...

We propose an allocation process for economic risk capital using an internal sequential auction in which investment allowances are based on marginal risk contributions. Division managers have incentive to give truthful bids because of bonus payments, which are linear in the division’s profit...

The aim of this paper is to expand the methodological spectrum of socially responsible investing by introducing stochastic sustainability returns into safety first models for portfolio choice. We provide a foundation of the notion of sustainability in portfolio theory and establish a general...

Funding small and medium-sized enterprises (SMEs) to support technological innovation is critical for national competitiveness. Technology credit scoring models are required for the selection of appropriate funding beneficiaries. Typically, a technology credit-scoring model consists of several...

We derive no-arbitrage bounds for expected excess returns to generate scenarios used in financial applications. The bounds allow to distinguish three regions: one where arbitrage opportunities will never exist, a second where arbitrage may be present, and a third, where arbitrage opportunities...