We prove that the Heston volatility is Malliavin differentiable under the classical Novikov condition and give an explicit expression for the derivative. This result guarantees the applicability of Malliavin calculus in the framework of the Heston stochastic volatility model. Furthermore we...

We consider a continuous time market model, in which agents influence asset prices. The agents are assumed to be rational and maximizing expected utility from terminal wealth. They share the same utility function but are allowed to possess different levels of information. Technically our model...

We combine and extend two existing lines of research in game theoretic studies of fisheries, building up on Quirk and Smith (1977), Anderson (1975), Fisher and Mirman (1996), Sumaila (1997) and most recently Datta and Mirman (1999) who developed either static or discrete time models, not...

The geometric mean reversion process X([dot operator]) is well known to play a fundamental role in economic dynamic models. While it is known, at least since Merton (1975), that the equilibrium distribution of geometric mean reversion, i.e. the distribution of X([infinity]), is a gamma...

We solve a Dixit and Pindyck type irreversible investment problem in continuous time under the assumption that the project value follows a Cox-Ingersoll-Ross process. This setup works well for modeling foreign direct investment in the framework of real options, when the exchange rate is...

We show that under the Black Scholes assumption the price of an arithmetic average Asian call option with fixed strike increases with the level of volatility . This statement is not trivial to prove and for other models in general wrong. In fact we demonstrate that in a simple binomial model no...

Due to the increasing risk of inflation and diminishing pension benefits, insurance companies have started selling in°ation-linked products. Selling such products the insurance company takes over some or all of the inflation risk from their customers. On the other side financial derivatives...

We show how infinite horizon stochastic optimal control problems can be solved via studying their finite horizon approximations. This often leads to analytical solutions for the infinite horizon problem by studying phase diagrams, even in cases where the complexity of the finite horizon case...

We consider the problem of hedging European options written on natural gas futures, in a market where prices of traded assets exhibit jumps, by trading in the underlying asset. We provide a general expression for the hedging strategy which minimizes the variance of the terminal hedging error, in...