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We consider a finite-horizon market-making problem faced by a dark pool that executes incoming buy and sell orders. The arrival flow of such orders is assumed to be random and, for each transaction, the dark pool earns a per-share commission no greater than the half bid-ask spread. Throughout...
Persistent link: https://www.econbiz.de/10011165915
Oil is perceived as a good diversification tool for stock markets. To fully understand this potential, we propose a new empirical methodology that combines generalized autoregressive score copula functions with high frequency data and allows us to capture and forecast the conditional...
Persistent link: https://www.econbiz.de/10011165916
We maximize the expected utility from terminal wealth for an HARA investor when the market price of risk is an unobservable random variable. We compute the optimal portfolio explicitly and explore the effects of learning by comparing it with the corresponding myopic policy. In particular, we...
Persistent link: https://www.econbiz.de/10011165917
Any solvency regime for financial institutions should be aligned with the two fundamental objectives of regulation: protecting liability holders and securing the stability of the financial system. From these objectives we derive two normative requirements for capital adequacy tests, called...
Persistent link: https://www.econbiz.de/10011166616
We study the probability mass at the origin in the SABR stochastic volatility model, and derive several tractable expressions for it, in particular when time becomes small or large. In the uncorrelated case, tedious saddlepoint expansions allow for (semi) closed-form asymptotic formulae. As an...
Persistent link: https://www.econbiz.de/10011166617
This paper solves a utility maximization problem under utility-based shortfall risk constraint, by proposing an approach using Lagrange multiplier and convex duality. Under mild conditions on the asymptotic elasticity of the utility function and the loss function, we find an optimal wealth...
Persistent link: https://www.econbiz.de/10011167129
Particle Metropolis-Hastings enables Bayesian parameter inference in general nonlinear state space models (SSMs). However, in many implementations a random walk proposal is used and this can result in poor mixing if not tuned correctly using tedious pilot runs. Therefore, we consider a new...
Persistent link: https://www.econbiz.de/10011167130
We provide an extension of the explicit solution of a mixed optimal stopping-optimal stochastic control problem introduced by Henderson and Hobson. The problem examines wether the optimal investment problem on a local martingale financial market is affected by the optimal liquidation of an...
Persistent link: https://www.econbiz.de/10011167131
We unify and extend a number of approaches related to constructing multivariate Variance-Gamma (V.G.) models for option pricing. An overarching model is derived by subordinating multivariate Brownian motion to a subordinator from the Thorin (1977) class of generalised Gamma convolution...
Persistent link: https://www.econbiz.de/10011168851
The diffusion of electric vehicles (EVs) is studied in a two-sided market framework consisting of EVs on the one side and EV charging stations (EVCSs) on the other. A sequential game is introduced as a model for the interactions between an EVCS investor and EV consumers. A consumer chooses to...
Persistent link: https://www.econbiz.de/10011168852