Structured financial products have gained more and more popularity in recent years, but nevertheless has their success so far notthoroughly been analyzed. In this article we develop a theoreticalframework for the design of optimal structured products and analyzethe maximal utility gain for an...

We observe that the standard variant of Prospect Theory cannot describe very risk-averse choices in simple lotteries. This makes it diffcult to accommodate it with experimental data. Using an exponential value function can solve this problem and allows to cover the whole spectrum of risk-averse...

This paper studies the role of strategy and the order book mar-ket mechanism in price dynamics and the order flow behaviour. To this end we analyse a zero-intelligence agent model of a dynamic limit order market. Stylised facts of limit order markets are shown to be influenced and, in some...

This paper introduces an expected value estimator with expert knowledge to the robust estimation of sovereign rating transitions which are characterised by few observations. Ourestimates of default premia within Mexican, Colombian and Brazilian Eurobond yield spreads provide a better fit than...

We present a model for the α-beauty contest that explains common patterns in ex-perimental data of one-shot and iterative games. The approach is based on two basic assumptions. First, players iteratively update their recent guesses. Second, players estimate intervals rather than exact numbers...

Crack and Ledoit (1996) discover the compass rose of stock returns, generated by discrete stock prices and additional assumptions concerning the level and variation of stock prices. They raise the question, whether this phenomenon does introduce predictable structures in stock returns. In...