In this paper we study the two-dimensional joint distribution of the first passage time of a constant level by spectrally negative generalized Ornstein-Uhlenbeck processes and their primitive stopped at this first passage time. By using martingales techniques, we show an explicit expression of...

Abstract In this paper we study parameter estimation via the Expectation Maximization (EM) algorithm for a continuous-time hidden Markov model with diffusion and point process observation. Inference problems of this type arise for instance in credit risk modelling. A key step in the application...

We study risk-minimizing hedging-strategies for derivatives in a model where the asset price follows a marked point process with stochastic jump-intensity, which depends on some unobservable state-variable process. This model reflects stylized facts that are typical for high frequency data. We...

In the paper we analyse in what way the implementation of dynamic hedging strategies affects the volatility of the underlying asset. To this end we first construct an economy where equilibrium prices are given by the classical Black- Scholes model of geometric Brownian Motion. Then we add...

Standard derivative pricing theory is based on the assumption of the market for the underlying asset being infinitely elastic. We relax this hypothesis and study if and how a large agent whose trades move prices can replicate the payoff of a derivative contract. Our analysis extends a prior work...

The paper deals with the valuation and hedging of non path- dependent European options on one or several underlyings in a model of an international economy which allows for both interest rate and exchange rate risk. The contingent claims may pay off in arbitrary currencies. Using martingale...

We consider a market where the price of the risky asset follows a stochastic volatility model, but can be observed only at discrete random time points. We determine a local risk minimizing hedging strategy, assuming that the information of the agent is restricted to the observations of the price...