Contingent claims with payoffs depending on finitely many asset prices are modeled as elements of a separable Hilbert space. Under fairly general conditions, including market completeness, it is shown that one may change measure to a reference measure under which asset prices are Gaussian and...

Return distributions in the class of pure jump limit laws are observed to reflect numerous asymmetries between the upward and downward motions of asset prices. The return distributions are modeled by self decomposable parametric laws with all parameters continuously responding to each other....

Markets passively accept a convex cone of cash flows that contains the the nonnegative cash flows. Different markets are defined by different cones and conditions are established to exclude the possibility of arbitrage between markets. Operationally these cones are defined by positive...

We introduce a new and easy to calculate measure for systemic risk in financial markets. This measure is baptized the Herd Behavior Index (HIX). It is model independent and forward looking, based on observed option data.In order to determine the degree of systemic risk or herd behavior in a...