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When to cross the spread: Curve following with singular control

Naujokat, Felix; Horst, Ulrich - 2011

In this article the problem of curve following in an illiquid market is addressed. Using techniques of singular stochastic control, we extend the results of [NW11] to a twosided limit order market with temporary market impact and resilience, where the bid ask spread is now also controlled. We...

Persistent link: https://www.econbiz.de/10010281591

Martingale approach in pricing and hedging European options under regime-switching

Milstein, Grigori N.; Spokoiny, Vladimir - 2011

The paper focuses on the problem of pricing and hedging a European contingent claim for an incomplete market model, in which evolution of price processes for a saving account and stocks depends on an observable Markov chain. The pricing function is evaluated using the martingale approach. The...

Persistent link: https://www.econbiz.de/10010281592

The merit of high-frequency data in portfolio allocation

Hautsch, Nikolaus; Kyj, Lada M.; Malec, Peter - 2011

This paper addresses the open debate about the effectiveness and practical relevance of highfrequency (HF) data in portfolio allocation. Our results demonstrate that when used with proper econometric models, HF data offers gains over daily data and more importantly these gains are maintained...

Persistent link: https://www.econbiz.de/10010281594

Parametric estimation: Finite sample theory

Spokoiny, Vladimir - 2011

The paper aims at reconsidering the famous Le Cam LAN theory. The main features of the approach which make it different … results are illustrated for the i.i.d. set-up as well as for generalized linear and median estimation. The results apply for …

Persistent link: https://www.econbiz.de/10010281596

Every symmetric 3 x 3 global game of strategic complementarities is noise independent

Basteck, Christian; Daniëls, Tijmen R. - 2010

We prove that the global game selection in all 3 x 3 payoff-symmetric supermodular games is independent of the noise structure. As far as we know, all other proofs of noise independence of such games rely on the existence of a so-called monotone potential (MP) maximiser. Our result is more...

Persistent link: https://www.econbiz.de/10010281597

An estimator for the quadratic covariation of asynchronously observed Itô processes with noise: Asymptotic distribution theory

Bibinger, Markus - 2011

The article is devoted to the nonparametric estimation of the quadratic covariation of non-synchronously observed Itô … distribution theory for a generalized multiscale estimator including a feasible central limit theorem with optimal convergence rate …, several generalizations of the model and an algorithm for the implementation warrant the utility of the estimation method in …

Persistent link: https://www.econbiz.de/10010281599

CRRA utility maximization under risk constraints

Moreno-Bromberg, Santiago; Pirvu, Traian A.; … - 2011

This paper studies the problem of optimal investment with CRRA (constant, relative risk aversion) preferences, subject to dynamic risk constraints on trading strategies. The market model considered is continuous in time and incomplete; furthermore, financial assets are modeled by Itô processes....

Persistent link: https://www.econbiz.de/10010281601

Spatially adaptive density estimation by localised Haar projections

Gach, Florian; Nickl, Richard; Spokoiny, Vladimir - 2011

idealised assumption that the true density is locally constant in a neighborhood of the point x of estimation, and an …

Persistent link: https://www.econbiz.de/10010281606

Solving DSGE models with a nonlinear moving average

Lan, Hong; Meyer-Gohde, Alexander - 2011

We introduce a nonlinear infinite moving average as an alternative to the standard state-space policy function for solving nonlinear DSGE models. Perturbation of the nonlinear moving average policy function provides a direct mapping from a history of innovations to endogenous variables,...

Persistent link: https://www.econbiz.de/10010286434

Forward-backward systems for expected utility maximization

Horst, Ulrich; Hu, Ying; Imkeller, Peter; Réveillac, … - 2011

In this paper we deal with the utility maximization problem with a general utility function. We derive a new approach in which we reduce the utility maximization problem with general utility to the study of a fully-coupled Forward-Backward Stochastic Differential Equation (FBSDE).

Persistent link: https://www.econbiz.de/10010286435