In this paper, we analyse options that are bought or sold by the company on whose stocks these options are written, leading to dilution and anti-dilution effects. We provide valuation equations for the European versions of such options, and discuss conditions for existence and uniqueness of...

We derive no-arbitrage bounds for expected excess returns to generate scenarios used in financial applications. The bounds allow to distinguish three regions: one where arbitrage opportunities will never exist, a second where arbitrage may be present, and a third, where arbitrage opportunities...

The effects of a Tobin tax on foreign exchange markets have long been disputed. We present an experiment with currency trading on two markets, where either none, one, or both markets are taxed. Our results confirm the hitherto undisputed issues: a tax reduces trading volume, shifts market share...

Corporate sports sponsorship is an important part of many companies? corporate communication strategy. We take the example of major football tournaments to show that sponsorship indeed affects the sponsor?s (stock) market value. We find a statistically significant impact of football results (at...

Many numerical optimization methods use scenario trees as a discrete approximation for the true (multi-dimensional) probability distributions of the problem's random variables. Realistic specifications in financial optimization models can lead to tree sizes that quickly become computationally...

A widespread belief is that index funds should earn the index return. We argue that this would lead to a serious paradox. In our model, we analyse the effects of an increasing number of investors switching from active to passive investment.