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Traditional portfolio optimization models specify placement of capital as rather irrevocably and fully at risk through investment horizon(s) or continuously. Under this constraint, asset class allocation typically serves as primary mode of diversification, pursuing risk moderation by seeking to...
Persistent link: https://www.econbiz.de/10013084090
- uncertainty, complexity and rank. First, the concept of epistemic uncertainty is sufficient for modeling and the concept of …. There are at least five equivalent ways of representing the measured model uncertainty and a new and an improved risk … categorization for mutual funds is presented. Second, the concept of (linear) system complexity is usually dealt with by presuming a …
Persistent link: https://www.econbiz.de/10012737206
- uncertainty, complexity and rank. First, the concept of epistemic uncertainty is sufficient for modeling and the concept of … fund selection. There are at least five equivalent ways of representing the measured model uncertainty and a new and an … improved risk categorization for mutual funds is presented. Second, the concept of (linear) system complexity is usually dealt …
Persistent link: https://www.econbiz.de/10012771756
In finance, decision making and choice requires that we assume that asset prices tend to trend. This assumption also logically enables us to construct exits to limit losses and protect capital. But investors have good reason to be uneasy regarding the potential for significant loss when using a...
Persistent link: https://www.econbiz.de/10013049923
Hedging of illiquid financial instruments is carried out with liquid instruments that, as a rule, have simpler payoff functions. For example, hedging of Asian or long-dated put options is carried out with vanilla puts, hedging of Bermuda swaptions is done with vanilla swaptions, etc. This kind...
Persistent link: https://www.econbiz.de/10013000625
It is a common understanding that bankruptcy is not a sudden occurrence for any organizations. Macro and micro economic studies have suggested numerous influential factors, which have substantial evidence toward firm's performance (Bekeris, 2012) and survivability (Nehrebecka & Dzik, 2013). With...
Persistent link: https://www.econbiz.de/10012905006
The recent analytical closed-form result ('http://ssrn.com/abstract=2549033' http://ssrn.com/abstract=2549033) discovered by Market Memory Trading L.L.C. (“MMT”) for the probability density function of the European style options with stochastic volatility, considered within the Heston model,...
Persistent link: https://www.econbiz.de/10013019454
Persistent link: https://www.econbiz.de/10013020217
The first ever explicit formulation of the concept of the option's probability density functions has been introduced in our publications “Breakthrough in Understanding Derivatives and Option Based Hedging - Marginal and Joint Probability Density Functions of Vanilla Options - True...
Persistent link: https://www.econbiz.de/10013022328
• It is not widely emphasized in the literature that derivatives are complex random quantities which should, by custom, be characterized by their probability density functions. • It is understood that Black-Scholes style of derivatives pricing represents an expected value, i.e. the...
Persistent link: https://www.econbiz.de/10013032725