The effect of model and parameter misspecification on the effectiveness of Gaussian hedging strategies for derivative financial instruments is analyzed, showing that Gaussian hedges in the `natural'' hedging instruments are particularly robust. This is true for all models that imply...

In this survey we discuss models with level-dependent and stochastic volatility from the viewpoint of derivative asset analysis. Both classes of models are generalisations of the classical Black-Scholes model; they have been developed in an effort to build models that are flexible enough to cope...

In this paper we analyze in what way the demand generated by dynamic hedging strategies affects the equilibrium prices of the underlying asset. We derive an explicit expression for the transformation of market volatility under the impact of hedging. It turns out that market volatility increases...

We deal with the valuration and hedging of non path-dependent European options on one or several underlyings in a model of an international economy which allows for both interest rate and exchange rate risk. Using martingale theory we provide a unified and easily applicable approach to pricing...

Following [10] we continue the study of the problem of expected utility maximization in incomplete markets. Our goal is to find minimal conditions on a model and a utility function for the validity of several key assertions of the theory to hold true....

A simple asset pricing model with two types of adaptively learning traders, fundamentalists and technical analysts, is studied. Fractions of these trader types, which are both boundedly rational, change over time according to evolutionary learning, with technical analysts conditioning their...

In a recent paper Loeffler/Schneider (2000) showed that introducing a tax on a financial market does not create an arbitrage opportunity...

Das vorliegende Papier verfolgt, den empirischen Zusammenhang zwischen den realen Aktienmarktniveaus von Deutschland und den USA zur Aktienmarktprognose zu verwenden ...

Vorliegendes Arbeitspapier analysiert die Einflüsse intertemporaler Renditezusammenhänge und fester Startwerte in Vektorautoregressions-(VAR-) Modellen für stetige Renditen anhand des Vergleichs mit einem statischen Random-Walk-Modell.

The market model of interest rates specifies simple forward or Libor rates as lognormaly distributed, their stochastic dynamics has a linear volatility function. This model is extended to quadratic volatility which is the product of a quadratic polynomial and a level-independent covariance...