At the start of the transition process in previously centrally planned economies the inflow of foreign capital was considered one of the main factors that allows the reduction of the economic and social costs of transformation. However, in practice, the role of foreign capital has appeared to be...

In this paper we are concerned with optimal investment decisions when dealing with land allocation problems. We aim to emphasise the importance of flexible modelling in order to capture irreversibility. In particular, we stretch a discrete model, firstly developed in Coggins and Ramezani...

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...

Using uncertainty about the future returns to migration, the option value theory of migration can explain low migration rates in spite of huge wage differences. This paper presents the theory in a simple two-period framework and uses ethnic Germans in the CIS to find empirical support for it....

In this paper, I examine an inter-temporal exchange economy with a complete financial market. The economy is populated by two heterogeneous investors who differ from each other in their attitudes towards risk. In such a model, a single representative agent can be created who generates the same...

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...

Financial markets embed expectations of central bank policy into asset prices. This paper compares two approaches that extract a probability density of market beliefs. The first is a simulated moments estimator for option volatilities described in Mizrach (2002); the second is a new approach...

Banking reform has proved to be one of the most problematic elements of economic transition in central and Eastern Europe. Therefore the paper considers the development of the Estonian banking sector and derives individual banks´ fragility scores during transition. To this end we use...

We consider optimal stopping problems for ambiguity averse decision makers with multiple priors. In general, backward induction fails. If, however, the class of priors is time-consistent, we establish a generalization of the classical theory of optimal stopping. To this end, we develop first...

The paper derives a valuation formula for the real option of a firm to undertake an irreversible investment in a foreign economy based on the endogenous dynamics of a stochastic macroeconomic framework with sluggish price adjustment. The option valuation formula is implemented to analyze the...