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A discrete time model of financial markets is considered. It is assumed that the stock price evolution is described by a homogeneous Markov chain. In the focus of attention is the expected value of the guaranteed profit of the investor that arises when the jumps of the stock price are bounded....
Persistent link: https://www.econbiz.de/10010293729
A decent budgetary portfolio is nothing more, and nothing less, than an accumulation of advantages that develop in quality and produce abundance money for the financial specialist to spend or reinvest. Markowitz (1959) is one of the pioneers of present day portfolio hypothesis. Generally, the...
Persistent link: https://www.econbiz.de/10011326855
A discrete time model of financial markets is considered. It is assumed that the stock price evolution is described by a homogeneous Markov chain. In the focus of attention is the expected value of the guaranteed profit of the investor that arises when the jumps of the stock price are bounded....
Persistent link: https://www.econbiz.de/10009728973
This empirical study analyzes the information and predictive content of the Baltic Dry Index (BDI) with respect to a range of financial assets and the macroeconomy. By using panel methodological approaches and daily data spanning the period 1985–2012, the empirical analysis documents the joint...
Persistent link: https://www.econbiz.de/10010197482
This paper studies the valuation of multiple American options in an incomplete market where asset prices follow Markov-modulated dynamics. The holder's optimal hedging and exercising strategies are determined from a utility maximization problem with optimal multiple stopping. We analyze the...
Persistent link: https://www.econbiz.de/10013038620
Classical quantitative finance models such as the Geometric Brownian Motion or its later extensions such as local or stochastic volatility models do not make sense when seen from a physics-based perspective, as they are all equivalent to a negative mass oscillator with a noise. This paper...
Persistent link: https://www.econbiz.de/10012826182
A new economic revolution liberating financial markets? Seeks to answer some of the questions driving the existential crisis embroiling finance: What is currency? What is value? What is a business? What is a bank, even?This article discusses how regulatory reform, transformative technologies,...
Persistent link: https://www.econbiz.de/10013021212
Banking operations are being rewired around a pair of KVA/FVA metrics which quantify market incompleteness, i.e. the impossibility of perfect replication. The FVA is the cost of funding of debt liabilities while the KVA is the risk adjustment for equity liabilities, also called cost of capital....
Persistent link: https://www.econbiz.de/10013023828
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....
Persistent link: https://www.econbiz.de/10012925532
This paper develops and implements an equilibrium model of systemic risk. The model derives a systemic risk measure, loss beta, in characterizing all too-big-to-fail banks using a capital insurance equilibrium. By constructing each bank's loss portfolio with a recent accounting approach, we...
Persistent link: https://www.econbiz.de/10013218351