Market mechanisms are increasingly being used as a tool for allocating somewhat scarce but unpriced rights and resources, and the European Emission Trading Scheme is an example. By means of dynamic optimization in the contest of firms covered by such environmental regulations, this paper...

We develop statistical methods to detect informed trading in options markets. We apply these methods to 31 companies from various sectors over 14 years analyzing approximately 9.6 million option prices. We find that option informed trading tends to cluster prior to certain events, takes place...

This appendix extends the empirical results in Chesney, Crameri, and Mancini (2011). Informed trading activities on put and call options are analyzed for 19 companies in the banking and insurance sectors from January 1996 to September 2009. Our empirical findings suggest that certain events such...

Replicating portfolios have recently emerged as an important tool in the life insurance industry, used for the valuation of companies' liabilities. This paper presents a replicating portfolio (RP) model for approximating life insurance liabilities as closely as possible. We minimize the L1 error...

A classic paper of Borwein/Lewis (1991) studies optimisation problems over L^p_+ with finitely many linear equality constraints, given by scalar products with functions from L^q. One key result shows that if some x in L^p_+ satisfies the constraints and if the constraint functions are...

This chapter gives an overview of current research in evolutionary finance. We mainly focus on the survival and stability properties of investment strategies associated with the Kelly rule. Our approach to the study of the wealth dynamics of investment strategies is inspired by Darwinian ideas...

We study equilibria of dynamic over-the-counter markets in which agents are distinguished by their preferences and information. Over time, agents are privately informed by bids and o ffers. Investors diff er with respect to information quality, including initial information precision, and also...

In the recent work of Dempster, Evstigneev and Taksar (2006) it has been shown that the von Neumann-Gale model of economic dynamics can serve as a convenient and natural framework for the analysis of questions of asset pricing and hedging under transaction costs. The present article focuses on a...

Evolutionary finance studies the dynamic interaction of investment strategies in financial markets. This market interaction generates a stochastic wealth dynamics on a heterogenous population of traders through the fluctuation of asset prices and their random payoffs. Asset prices are...

We solve for the equilibrium dynamics of information sharing in a large population. Each agent is endowed with signals regarding the likely outcome of a random variable of common concern. Individuals choose the effort with which they search for others from whom they can gather additional...