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This paper studies option pricing based on a reverse engineering (RE) approach. We utilize artificial intelligence in order to numerically compute the prices of options. The data consist of more than 5000 call- and put-options from the German stock market. First, we find that option pricing...
Persistent link: https://www.econbiz.de/10013200246
This paper addresses a multi-period portfolio selection problem when the number of assets in the financial market is large. Using an exponential utility function, the optimal solution is shown to be a function of the inverse of the covariance matrix of asset returns. Nonetheless, when the number...
Persistent link: https://www.econbiz.de/10012431082
The maximum diversification portfolio as defined by Choueifaty (2011) depends on the vector of asset volatilities and the inverse of the covariance matrix of the asset return. In practice, these two quantities need to be replaced by their sample statistics. The estimation error associated with...
Persistent link: https://www.econbiz.de/10012431092
The maximum diversification has been shown in the literature to depend on the vector of asset volatilities and the inverse of the covariance matrix of the asset return covariance matrix. In practice, these two quantities need to be replaced by their sample statistics. The estimation error...
Persistent link: https://www.econbiz.de/10012696308
We solve for the optimal portfolio allocation in a setting where both conditional correlation and theclustering of extreme events are considered. We demonstrate that there is a substantial welfare loss indisregarding tail dependence, even when dynamic conditional correlation has been accounted...
Persistent link: https://www.econbiz.de/10010326016
Transaction-cost models in continuous-time markets are considered. Given that investors decide to buy or sell at certain time instants, we study the existence of trading strategies that reach a certain final wealth level in continuous-time markets, under the assumption that transaction costs,...
Persistent link: https://www.econbiz.de/10011708976
Anwendung der Extremwerttheorie zur Quantifizierung von Marktpreisrisiken – Test der Relevanz anhand vergangener Extrembelastungen von DAX und MSCI Europe Ein Verfahren, das gezielt entwickelt wurde, um Risiken mit sehr geringen Eintrittswahrscheinlichkeiten zu quantifizieren, stellt die...
Persistent link: https://www.econbiz.de/10014522655
Due to their well-known indeterminacies, factor models require identifying assumptions to guarantee unique parameter estimates. For Bayesian estimation, these identifying assumptions are usually implemented by imposing constraints on certain model parameters. This strategy, however, may result...
Persistent link: https://www.econbiz.de/10010310637
This article evaluates the performance of structural equation models in validating measurement models for hypothetical constructs and deals with specific issues following from the way this methodology is typically applied in scale construction. In particular, controlling for various types of...
Persistent link: https://www.econbiz.de/10010263663
Many researchers seem to be unsure about how to specify formative measurement models in software programs like LISREL or AMOS and to establish identification of the corresponding structural equation model. In order to make identification easier, a new, mainly graphically-oriented approach is...
Persistent link: https://www.econbiz.de/10010263664