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Closed-form solutions for European and Digital calls in the Hull and White stochastic volatility model and their relation to locally R-minimizing and Delta hedges

Ewald, Christian-Oliver; Schenk-Hoppé, Klaus Reiner; … - Institut für Schweizerisches Bankwesen <Zürich> - 2006

This paper derives an analytic expression for the distribution of the average volatility in the stochastic volatility model of Hull and White. This result answers a longstanding question, posed by Hull and White (Journal of Finance 42, 1987), whether such an analytic form exists. Our findings...

Persistent link: https://www.econbiz.de/10005858327

Dynamic utility indifference valuation via convex risk measures

Klöppel, Susanne; Schweizer, Martin - Institut für Schweizerisches Bankwesen <Zürich> - 2005

We study the dynamic utility indifference value process p(X) when the usefulness of X is evaluated via a dynamic monetary concave utility functional (DMCUF) instead of von Neumann/Morgenstern expected utility. A DMCUF is minus a dynamic convex risk measure. The key tools for our investigations...

Persistent link: https://www.econbiz.de/10005858886

Stochastic modeling of private equity: an equilibrium based approach to fund valuation

Buchner, Axel; Kaserer, Christoph; Wagner, Niklas - 2006

In this paper, we present a new approach to measure the returns of private equity investments based on a stochastic model of the dynamics of a private equity fund. Our stochastic model of a private equity fund consists of two independent stages: the stochastic model of the capital drawdowns and...

Persistent link: https://www.econbiz.de/10010305730

The price-setting behavior of banks: An analysis of open-end leverage certificates on the German market

Entrop, Oliver; Scholz, Hendrik; Wilkens, Marco - Lehrstuhl für ABWL, Finanzierung und Bankbetriebslehre … - 2008

This paper presents the first analysis of open-end leverage certificates on the Germanmarket. The major innovations of these certificates are twofold. First, issuers announcea price-setting formula according to which they are willing to buy and sell thecertificates over time. Second, the...

Persistent link: https://www.econbiz.de/10005857700

Risk Minimization in Stochastic Volatility Models: Model Risk and Empirical Performance

Poulsen, Rolf; Schenk-Hoppé, Klaus Reiner; Ewald, … - Institut für Schweizerisches Bankwesen <Zürich> - 2007

In this paper the performance of locally risk-minimizing hedge strategies for European options in stochastic volatility models is studied from an experimental as well as from an empirical perspective. These hedge strategies are derived for a large class of diffusion-type stochastic volatility...

Persistent link: https://www.econbiz.de/10005858246

Hedging and pricing in imperfect markets under non-convexity

Assa, Hirbod; Gospodinov, Nikolay - 2014

This paper proposes a robust approach to hedging and pricing in the presence of market imperfections such as market … incompleteness and frictions. The generality of this framework allows us to conduct an in-depth theoretical analysis of hedging … proposed theoretical approach are illustrated with an application on hedging economic risk. …

Persistent link: https://www.econbiz.de/10010397681

The Influence of Corporate Taxes on Pricing and Capital Structure in Property-Liability Insurance

Gatzert, Nadine; Schmeiser, Hato - Institut für Versicherungswirtschaft <Sankt Gallen> - 2006

A change in the corporate tax level can have a significant impact on rate making and capital structure for insurance companies. The purpose of this paper is to study this effect on competitive equity-premium combinations for different asset and liability models while retaining a fixed safety...

Persistent link: https://www.econbiz.de/10005861541

Multiple Trees Subject to Event Risk

Porchia, Paolo; Trojani, Fabio - National Centre of Competence in ResearchFinancial … - 2009

We study an equilibrium asset pricing model with several Lucas (1978) trees subject toevent risk, that is, the possibility that trees experience unexpected disasters. We exploit themarket clearing mechanism, in the presence of multiple positive net supply assets, to showthat the implications of...

Persistent link: https://www.econbiz.de/10005868703

Detecting Informed Trading Activities in the OptionsMarkets

Chesney, Marc; Crameri, Remo; Mancini, Loriano - Institut für Schweizerisches Bankwesen <Zürich> - 2009

This paper presents a new method to detect informed trading activities in the options markets.An option trade is identified as informed when it is characterized by an unusual largeincrement in open interest and volume, induces large gains, and is not hedged in the stock market.For the period...

Persistent link: https://www.econbiz.de/10005868704

Convexity Bounds for BSDE Solutions, WithApplications to Indifference Valuation

Frei, Christoph; Malamud, Semyon; Schweizer, Martin - National Centre of Competence in ResearchFinancial … - 2009

We consider backward stochastic dierential equations (BSDEs) witha particular quadratic generator and study the behaviour of their solu-tions when the probability measure is changed, the ltration is shrunk,or the underlying probability space is transformed.[...]

Persistent link: https://www.econbiz.de/10005868718