The study at hand deals with the expectations of professional analysts and novices in the context of foreign exchange markets. We analyze the respective forecasting accuracy and our results indicate that there exist substantial differences between professional forecasts and judgmental forecasts...

The empirical performance of macroeconomic exchange rate models is more than disappointing. This dismal result is also reflected in the forecasting capabilities of professional analysts: all in all, analysts are not in a position to beat naïve random walk forecasts. The root for this deficient...

In an arbitrage free incomplete market we consider the problem of maximizing terminal isoelastic utility. The relationship between the optimal portfolio, the optimal martingale measure in the dual problem and the optimal value function of the problem is described by an BSDE. For a totally...

In a continuous time, arbitrage free, non-complete market with a zero bond, we find the intertemporal price for risk to equal the standard deviation of the discounted variance opti- mal martingale measure divided by the zero bond price. We show the Hedging Numeraire to equal the Market Portfolio...

We consider two sequences of Markov chains induc- ing equivalent measures on the discrete path space. We estab- lish conditions under which these two measures converge weakly to measures induced on the Wiener space by weak solutions of two SDEs, which are unique in the sense of probability law....

Summary We study reward over penalty for risk ratios E [ u ( V )]/ E [ρ( V )], V ∈ V , where V ⊆ L 1 ( P ) describes a linear space of attainable returns in an arbitrage-free market, u is concave and ρ ≥ 0 is convex. It turns out that maximizing such reward over penalty ratios is...

SUMMARY For a monetary utility functional U and a coherent risk measure ρ, both with compact scenario sets in L q , we optimize the ratio α( V ): = U ( V )/ρ( V ) over an (arbitrage-free) linear sub-space V ⊆ L p , 1 ≤ p ≤ ∞, of attainable returns in an incomplete market model such...