In this paper the performance of locally risk-minimizing hedge strategies for European options in stochastic volatility models is studied from an experimental as well as from an empirical perspective. These hedge strategies are derived for a large class of diffusion-type stochastic volatility...

This paper deals with the deterministic and stochastic versions of the von Neumann-Gale model. Von Neumann's (1937) original concern was to determine a balanced path growing at a maximal rate for a linear and stationary technology and a price system supporting that path.Such a pair (a path and a...

We conduct a laboratory experiment to study whether people in-tuitively use real-option strategies in a dynamic investment setting.The participants were asked to play as an oil manager and make pro-duction decisions in response to a simulated mean-reverting oil price.Using cluster analysis,...

The purpose of this paper is two-fold. First is to extend the notions of an n-dimensional semimartingaleand its stochastic integral to a piecewise semimartingale of stochastic dimension. The propertiesof the former carry over largely intact to the latter, avoiding some of the pitfalls of...

Motivated by the Chinese experience, we analyze a semi-open economy where the centralbank has access to international capital markets, but the private sector has not. Thisenables the central bank to choose an interest rate different from the international rate.We examine the optimal policy of...

Following a trend of sustained and accelerated growth, the VIXfutures and options market has become a closely followed, active andliquid market. The standard stochastic volatility models | whichfocus on the modeling of instantaneous variance | are unable to t theentire term structure of VIX...

We consider nancial positions belonging to the Banach lattice of bounded measurable functionson a given measurable space. We discuss risk measures generated by general acceptance sets allowingfor capital injections to be invested in a pre-specied eligible asset with an everywhere positive...

For utility maximization problems under proportional transaction costs, it hasbeen observed that the original market with transaction costs can sometimes be replacedby a frictionless shadow market that yields the same optimal strategy and utility. However,the question of whether or not this...

There is strong empirical evidence that the pricing kernel is Ushaped,which provides a way to explain the substantial coskewnesspremium. Existing studies typically use a polynomial approximationof the pricing kernel. Problematically, these polynomials have, inmost cases, increasing parts by...