In this paper, we study the benefits derived from international diversification of stock portfoliosfrom Hungarian as well as German point of view. The Hungarian Stock Exchange is anemerging market in contrast to the German capital market which is one of the largest marketsin the world. In an ex...

We study the problem of finding the minimal initial capital needed in order to hedge without risk a barrier option when the vector of proportions of wealth invested in each risky asset is constraint to lie in a closed convex domain...

More and more investors apply socially responsible screens whenbuilding their stock portfolios. This raises the question whether theseinvestors can increase their performance by incorporating such screensinto their investment process. To answer this question we implement asimple trading strategy...

In June 2003 Swiss banks held over CHF 500 billion in mortgages. This important segment accounts for about 63% of all loan portfolios of Swiss banks. Since default insurance is not common in Switzerland, the corresponding risks are a severe threat for the health of the financial system. We...

In this paper we present a modelling framework for portfolio credit risk which incorporates the dependence between risk-free interest-rates and the default loss process. The contribution in this approach is that - besides the traditional diffusion based covariation between loss intensities and...

The paper investigates how buyer-supplier firm-specific relationships affect security prices. Starting from the empirical inconsistencies associated with some standard structural models we propose a structural model of firm dependence in a vertically connected network of firms based on cash flow...

Three types of agents acting on different information sets are considered: fully informed agents, insiders, and outsiders. Differences in information quality are shown to affect the properties of their optimal portfolios. For an outsider, the share of wealth invested in the stock is decreasing...

Economic cycles are the key credit portfolio risk driver and they are autocorrelated over time. We then show that it is economically meaningful to define risk for credit portfolios in a multi period setup. Since one period expected shortfall fails to measure risk adequately in a multi period...

We consider optimization problems for minimizing conditional value atrisk (CVaR) from a computational point of view, with an emphasis on financial applications. As a general solution approach, we suggest to reformulate these CVaR optimization problems as twostage recourse problems of stochastic...