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static superhedge, i.e. a buy-and-hold strategy generating an affine-linear payoffs. We study whether a superhedge can be … which require the same initial capital. In a model with stochastic jumps, it is always ither a dynamic or a static strategy … the strategy will never contain an investment in the money market account. On the other hand, when interest rates are …
Persistent link: https://www.econbiz.de/10002462819
including stochastic volatility models. A robust hedging strategy avoids any losses as long as thec realised volatility stays …
Persistent link: https://www.econbiz.de/10002463422
Persistent link: https://www.econbiz.de/10003389801
We perform a general equilibrium analysis in a complete markets economy whenthe dividend follows a jump-diffusion process with stochastic volatility. Agents haveCRRA utility, but differ with respect to their degree of risk aversion. The keyoutput of our analysis is the structure of the...
Persistent link: https://www.econbiz.de/10005867617
We consider an exchange economy with two heterogeneous stocks and twogroups of investors. Dividends follow diusion processes, with a constant expectedgrowth rate for one stock and a stochastic drift for the other. 'Rationalinvestors' can either observe this stochastic drift without error or...
Persistent link: https://www.econbiz.de/10005867619
In this paper we perform a general equilibrium analysis when the dividend followsa jump-diffusion process with stochastic volatility, where both the dividend itselfand its volatility can jump. We work in a complete markets economy and assumethat agents have CRRA utility, but can differ with...
Persistent link: https://www.econbiz.de/10005867620
In this paper we study the equilibrium in a heterogeneous economy with twogroups of investors. Over-confident experts incorrectly assume that their signalfor the drift of the dividend process is correlated with the true drift, butinterpret the signal otherwise perfectly. Rational laymen avoid...
Persistent link: https://www.econbiz.de/10005867621
thatthe semi-static replication strategy which builds on the log-contract fails in case ofjumps. Our conclusion is that the …
Persistent link: https://www.econbiz.de/10005867623
Model mis-specification can cause substantial utility losses in portfolio planning.In this paper, we compare two approaches to cope with this problem,robust control and learning. We derive the optimal portfolio strategies and theutility losses due to model mis-specification. Surprisingly,...
Persistent link: https://www.econbiz.de/10005867627
The observed prices of out-of-the money put options seem too high given standardderivative pricing models. One possible explanation is a Peso problem: crashes (forwhich the payoff of a put is high) are taken into account for pricing, but are under-represented in the data sets used for empirical...
Persistent link: https://www.econbiz.de/10005867630