Showing 1 - 10 of 244
Recursive marginal quantization (RMQ) allows the construction of optimal discrete grids for approximating solutions to stochastic differential equations in d-dimensions. Product Markovian quantization (PMQ) reduces this problem to d one-dimensional quantization problems by recursively...
Persistent link: https://www.econbiz.de/10012829782
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...
Persistent link: https://www.econbiz.de/10012981122
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...
Persistent link: https://www.econbiz.de/10011209855
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...
Persistent link: https://www.econbiz.de/10012985084
their minimal costs, lower than the classical actuarial theory predicts. Due to unhedgeable mortality risk, life insurance …
Persistent link: https://www.econbiz.de/10012891148
The objective of this paper is to consider defaultable term structure models in a general setting beyond standard risk-neutral models. Using as numeraire the growth optimal portfolio, defaultable interest rate derivatives are priced under the real-world probability measure. Therefore, the...
Persistent link: https://www.econbiz.de/10013098072
Monetary policy has pursued the concept of inflation targeting. This has been implemented in many countries. Here interest rates are supposed to respond to an inflation gap and output gap. Yet, recently monetary policy, in particular in the US after the subprime and the credit crises, the...
Persistent link: https://www.econbiz.de/10014203097
This paper introduces a general market modeling framework, the benchmark approach, which assumes the existence of the numeraire portfolio. This is the strictly positive portfolio that when used as benchmark makes all benchmarked nonnegative portfolios supermartingales, that is intuitively...
Persistent link: https://www.econbiz.de/10013098197
The paper discusses the problem of hedging not perfectly replicable contingent claims by using a benchmark, the numerraire portfolio, as reference unit. The proposed concept of benchmarked risk minimization generalizes classical risk minimization, pioneered by Follmer, Sondermann and Schweizer....
Persistent link: https://www.econbiz.de/10013098521
The paper discusses the problem of hedging not perfectly replicable contingent claims by using a benchmark, the numerraire portfolio, as reference unit. The proposed concept of benchmarked risk minimization generalizes classical risk minimization, pioneered by Follmer, Sondermann and Schweizer....
Persistent link: https://www.econbiz.de/10013098766