The inaccuracy of the Black-Scholes formula arises from two aspects: the formula is for European options while most real option contracts are American; the formula is based on the assumption that underlying asset prices follow a lognormal distribution while in the real world asset prices cannot...

The importance of weather as a production factor in agriculture is well established long time and a significant portion of yield fluctuations is caused by weather risks. Traditionally, farmers have tried to hedge against unfavorable weather using insurance, such as crop insurance. In recent...

Variabel verzinsliche Kundengeschäfte repräsentieren einen bedeutenden Teil der Aktiva und Passiva von Banken. Ihre Bewertung und Risikoanalyse ist sowohl für Banken als auch für die Bankenaufsicht anspruchsvoll, da insbesondere das Zusammenspiel zwischen Markt- und Produktzinsen sich als...

In this paper we analyse the mean-variance hedging approach in an incomplete market under the assumption of additional market information, which is represented by a given, finite set of observed prices of non-attainable contingent claims. Due to no-arbitrage arguments, our set of investment...

Based on a general specification of the asset speci?c pricing kernel, we develop a pricing model using an information process with stochastic volatility. We derive analytical asset and option pricing formulas. The asset prices in this rational expectations model exhibit crash-like, strong...

This article studies the characteristics of a S-based tax system under default risk. In particular we show that its neutrality properties depend on whether debt is protected or unprotected. In the former case, this system is neutral. In the latter case, where default timing is optimally chosen...

Implied volatility is one of the important topics in financial markets. Due to option data's characteristics, estimating implied volatility is a challenging task for both academia and industry. Dynamic Semiparametric Factor Model (DSFM) is method to model high-dimensional data with dynamic...

There has been an on-going debate about choices of the most suitable model amongst avariety of model specifications and parameterizations. The first dissertation essay investigateswhether asymmetric leptokurtic return distributions such as Hansen’s (1994) skewed tdistributioncombined with...

Nowadays, the regime switching model has become a popular model in mathematical finance and actuarial science. The market is not complete when the model has regime switching. Thus, pricing the regime switching risk is an important issue. In Naik (1993), a jump diffusion model with two regimes is...

The pricing kernel puzzle of Jackwerth (2000) concerns the fact that the empirical pricing kernel implied in S&P 500 index options and index returns is not monotonically decreasing in wealth as standard economic theory would suggest. Thus, those options are currently priced in a way such that...