This paper considers the realistic modelling of derivative contracts on exchange rates. We propose a stochastic volatility model that recovers not only the typically observed implied volatility smiles and skews for short dated vanilla foreign exchange options but allows one also to price payoffs...

Using a range of stochastic volatility models well-known in the nance literature, we study the existence of money market bubbles in the US economy. Money market bubbles preclude the existence of a risk-neutral pricing measure. Understanding whether markets exhibit money market bubbles is crucial...

This paper introduces a more general modeling world than available under the classical no-arbitrage paradigm in finance. New research questions and interesting related econometric studies emerge naturally. To explain in this paper the new approach and illustrate first important consequences, we...

The growth optimal portfolio (GOP) plays an important role in finance, in particular in derivative pricing, where it is employed as a num\'eraire portfolio, allowing to price contingent claims directly under the real world probability measure. This paper derives an extension of a time dependent...

Is it possible to achieve almost riskless investment results in the long run through equity investments? The persistence of low interest rates is spurring research on this question, because of the need to increase yields, while limiting variability of investment results. Target date funds aim to...