We address the problem of minimizing the risk of an exposure (e.g., cash holdings) to a small number of defaultable counterparties based on spectral risk measures, in particular the expected shortfall. The resulting risk-minimal allocation turns out to be economically implausible in a number of...

We analyze retail order flow in terms of intra-day feedback trading patterns. Using a unique data set of exchange trades and high-frequency quotes, we first provide evidence that retail investors actively and consciously respond to short-term intra-day returns in a negative feedback, contrarian...

European sovereign debt benefits from privileges in banking regulation throughout all risk categories. In contrast to the risk-based approach applied to other asset classes, it does not have to be backed by equity, can be fully financed by short-term, unstable funding sources, is treated as...

The well-known binomial and trinomial tree models for option pricing are examined from the point of view of numerical efficiency. Common lattices use a large part of time resources for calculations which are almost irrelevant for the solution. To avoid this waste of resources, the tree is...