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Random step functions model for interest rates
Virag, Eleanor; Klebaner, Fima C.; Borovkov, Konstantin - In: Finance and Stochastics 7 (2003) 1, pp. 123-143
We propose a new model for pricing of bonds and their options based on the short rate when the latter exhibits a step …
Persistent link: https://www.econbiz.de/10005759620
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Bond pricing in a hidden Markov model of the short rate
LandÊn, Camilla - In: Finance and Stochastics 4 (2000) 4, pp. 371-389
>For this model we look at the bond pricing problem. In order to obtain more concrete results we introduce the notion of a semi … consider the pricing problem when the modulating process can not be directly observed. It turns out that pricing in this …
Persistent link: https://www.econbiz.de/10005759623
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Perfect option hedging for a large trader
Frey, RØdiger - In: Finance and Stochastics 2 (1998) 2, pp. 115-141
Standard derivative pricing theory is based on the assumption of agents acting as price takers on the market for the …
Persistent link: https://www.econbiz.de/10005184372
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Local time, coupling and the passport option
Henderson, Vicky; Hobson, David - In: Finance and Stochastics 4 (2000) 1, pp. 69-80
A passport option, as introduced and marketed by Bankers Trust, is a call option on the balance of a trading account …. The strategy that this account follows is chosen by the option holder, subject to position limits. <p>We derive a … simplified form for the price of the passport option using local time. A key insight is that Tanaka's formula and the Skorokhod …
Persistent link: https://www.econbiz.de/10005184375
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Efficient hedging: Cost versus shortfall risk
FÃllmer, Hans; Leukert, Peter - In: Finance and Stochastics 4 (2000) 2, pp. 117-146
An investor faced with a contingent claim may eliminate risk by (super-) hedging in a financial market. As this is often quite expensive, we study partial hedges which require less capital and reduce the risk. In a previous paper we determined quantile hedges which succeed with maximal...
Persistent link: https://www.econbiz.de/10005184386
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A model of financial market with several interacting assets. Complete market case
Steblovskaya, Victoria; Albeverio, Sergio - In: Finance and Stochastics 6 (2002) 3, pp. 383-396
equivalent martingale measure, absence of arbitrage and completeness are given. In the case of a complete market the pricing of …
Persistent link: https://www.econbiz.de/10005613408
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Risk minimization under transaction costs
Guasoni, Paolo - In: Finance and Stochastics 6 (2002) 1, pp. 91-113
We study the general problem of an agent wishing to minimize the risk of a position at a fixed date. The agent trades in a market with a risky asset, with incomplete information, proportional transaction costs, and possibly constraints on strategies. In particular, this framework includes the...
Persistent link: https://www.econbiz.de/10005613414
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Quantile hedging
FÃllmer, Hans; Leukert, Peter - In: Finance and Stochastics 3 (1999) 3, pp. 251-273
In a complete financial market every contingent claim can be hedged perfectly. In an incomplete market it is possible to stay on the safe side by superhedging. But such strategies may require a large amount of initial capital. Here we study the question what an investor can do who is unwilling...
Persistent link: https://www.econbiz.de/10005613416
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An analysis of a least squares regression method for American option pricing
Protter, Philip; Clément, Emmanuelle; Lamberton, Damien - In: Finance and Stochastics 6 (2002) 4, pp. 449-471
Recently, various authors proposed Monte-Carlo methods for the computation of American option prices, based on least …
Persistent link: https://www.econbiz.de/10005613445
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Local martingales and the fundamental asset pricing theorems in the discrete-time case
Jacod, J.; Shiryaev, A.N. - In: Finance and Stochastics 2 (1998) 3, pp. 259-273
This paper is devoted to giving simpler proofs of the two fundamental theorems of asset pricing theory, in iscrete …
Persistent link: https://www.econbiz.de/10005613446