We find empirical evidence that mean-reverting jump processes are not statistically adequate to model electricity spot price spikes but independent, signed sums of such processes are statistically adequate. Further we demonstrate a change in the composition of these sums after a major economic...

Modern portfolio theory regards the return of an asset as its upside, while volatilityis seen as its downside. This view is shared by the majority of investors who dislikevolatile markets. Recent results in financial mathematics, however, show thatvolatility is actually good, rather than bad,...

In this paper the performance of locally risk-minimizing hedge strategies for European options in stochastic volatility models is studied from an experimental as well as from an empirical perspective. These hedge strategies are derived for a large class of diffusion-type stochastic volatility...

This paper derives an analytic expression for the distribution of the average volatility in the stochastic volatility model of Hull and White. This result answers a longstanding question, posed by Hull and White (Journal of Finance 42, 1987), whether such an analytic form exists. Our findings...

We show that the volatility of a price process, which is usuallyregarded as an impediment to financial growth, can serve as an en-dogenous factor in its acceleration.

This chapter surveys theoretical research on the long-term performance of fixed-mix investment strategies. These self-financing strategies rebalance the portfolio over time so as to keep constant the proportions of wealth invested in various assets. The main result is that wealth can be grown...