In this paper, we obtain sharp estimates for the expected payoffs and prices of European call options on an asset with an absolutely continuous price in terms of the price density characteristics. These techniques and results complement other approaches to the derivative pricing problem. Exact...

Many key variables in finance, economics and risk management, including financial returns and foreign exchange rates, exhibit nonlinear dependence, heterogeneity and heavy-tailedness of some usually largely unknown type.The presence of non-linear dependence (usually modelled using GARCH-type...

Despite the availability of more sophisticated methods, a popular way to estimate a Pareto exponent is still to run an OLS regression: log (Rank)= c - blog (Size), and take b as an estimate of the Pareto exponent. The reason for this popularity is arguably the simplicity and robustness of this...

This paper focuses on the analysis of long-memory properties of copula-based time series. We show via simulations that there exist Clayton copula-based stationary Markov processes that exhibit long memory on the level of copulas. This long memory is captured by an extremely slow hyperbolic decay...

This paper presents an analysis of diversification and portfolio value at risk for heavy-tailed dependent risks in models with multiple common shocks. We show that, in the framework of value at risk comparisons, diversification is optimal for moderately heavy-tailed dependent risks with common...