Market mechanisms are increasingly being used as a tool for allocating somewhat scarce but unpriced rights and resources, such as air and water. Tradable permits have emerged as the most cost–effective measure leading to the emergence of both nationwide (SO2) and supranational (CO2) emission...

A random variable dominates another random variable with respect to the covariance order if the covariance of any two monotone increasing functions of this variable is smaller. We characterize completely the covariance order, give strong sufficient conditions for it, present a number of examples...

We use a parametric portfolio approach to estimate optimal commercial real estate portfolio policies. We do so using the NCREIF data set of commercial properties over the sample period 1984:Q2 to 2009:Q1. The richness of this extensive data set and the flexibility of the parametric portfolio...

Following the ideas of Bohr, Von Neumann, and Benioff, we formulate quantum decision theory (QDT) as the quantum-mechanical theory of measurement for probability operators. QDT captures the effect of superposition of composite prospects, including many incorporated intentions. It is based on the...

We use a quantile-based measure of conditional skewness (or asymmetry) that is robust to outliers and therefore particularly suited for recalcitrant series such as emerging market returns. Our study is on the following portfolio returns: developed markets, emerging markets, the world, and...

I model a financial market that dries out in the wake of premature liquidations. Two main results are obtained. First, liquidity may vanish even if small, riskneutral buyers could easily compensate the ongoing selling. Thus, more markets are vulnerable to “runs” than suggested by previous...

Hedge fund indices have grown in numbers over the recent years and made their presence widespread through a number of providers. Assets linked to hedge fund indices currently exceed $12 billion, and the debate is now focusing on whether they should be considered as eligible assets for UCITS III...

This paper develops a tractable real options framework to analyze the effects of asymmetric information on investment and financing decisions when firms require external funds to finance investment. Our analysis shows that corporate insiders can signal their private information to outside...

Prediction (or information) markets are markets where participants trade contracts whose payoff depends on unknown future events. Studying prediction markets allows to avoid many problems, which arise in some artificially designed behavioral experiments investigating collective decision making...

We introduce a notion of volatility uncertainty in discrete time and define the corresponding analogue of Peng’s G-expectation. In the continuous-time limit, the resulting sublinear expectation converges weakly to the G-expectation. This can be seen as a Donsker-type result for the G-Brownian...