The paper analyzes the simulated long-term behavior of well diversified portfolios in continuous financial markets. It focuses on the equi-weighted index and the market portfolio. The paper illustrates that the equally weighted portfolio constitutes a good proxy of the growth optimal portfolio,...

The aim of this paper is to present different views on Black-Scholes model. The Black-Scholes equation is one of the most significant equations in financial mathematics. It is commonly used to determine price of options. However its applications as well as modifications go far beyond this...

Leland's approach to the hedging of derivatives under proportional transaction costs is based on an approximate replication of the European-type contingent claim VT using the classical Black Scholes formulae with a suitably enlarged volatility. The formal mathematical framework is a scheme of...

In order to price multivariate derivatives, there is need for a multivariate stock price model. To keep the simplicity and attractiveness of the one-dimensional Black & Scholes model, one often considers a multivariate model where each individual stock follows a Black & Scholes model, but the...

This paper examines the association between the default risk of foreign bank subsidiaries in developing countries and their parents during the global financial crisis, with the purpose of determining the size and sign of this correlation and, more importantly, understanding what factors can help...

In 1973, Fischer Black and Myron Scholes published their seminal work on options pricing. Their model relied on a clever hedge which seemingly resulted in a risk-free portfolio. However, further analysis of this portfolio reveals that it may not be risk-free at all. A truly risk-free portfolio...

This article investigates the delta hedging performance of the skewness and kurtosis adjusted Black-Scholes model of Corrado and Su (1996) and Brown and Robinson (2002). The empirical tests in the FTSE 100 index option market show that the more sophisticated skewness and kurtosis adjusted model...