A discrete time model of financial markets is considered. It is assumed that the stock price evolution is described by a homogeneous Markov chain. In the focus of attention is the expected value of the guaranteed profit of the investor that arises when the jumps of the stock price are bounded....

A discrete time model of financial markets is considered. It is assumed that the relative jumps of the risky security price are independent non-identically distributed random variables. In the focus of attention is the expected non-risky profit of the investor that arises when the jumps of the...

A decent budgetary portfolio is nothing more, and nothing less, than an accumulation of advantages that develop in quality and produce abundance money for the financial specialist to spend or reinvest. Markowitz (1959) is one of the pioneers of present day portfolio hypothesis. Generally, the...

Research papers in empirical finance and financial econometrics are among the most widely cited, downloaded and viewed articles in the discipline of Finance. The special issue presents several papers by leading scholars in the field on “Recent Developments in Financial Economics and...

We study whether prices of traded options contain information about future extreme market events. Our option-implied conditional expectation of market loss due to tail events, or tail loss measure, predicts future market returns, magnitude, and probability of the market crashes, beyond and above...

Option-implied betas are a promising alternative to historical beta estimators, because they are inherently forward-looking and can incorporate new information immediately and fully. Recently, different implied beta estimators have been developed in previous literature, but very little is known...

The objective of the paper is to extend the results in Fournié, Lasry, Lions, Lebuchoux, and Touzi (1999), Cass and Fritz (2007) for continuous processes to jump processes based on the Bismut-Elworthy-Li (BEL) formula in Elworthy and Li (1994). We construct a jump process using a subordinated...

This article aims to extend evaluation of the classic multifactor model of Carhart (1997) for the case of global equity indices and to expand analysis performed in Sakowski et. al. (2015). Our intention is to test several modifications of these models to take into account different dynamics of...

In this paper we examine the problem of partially hedging a given credit risk exposure. We derive hedges which satisfy certain optimality criteria: For a given investment into the hedge they minimize the remaining risk, or vice versa. This is motivated by the fact that it is a core business of...