In this paper we present a method for calculating the entire hedge surface of a derivative who’s future underlying asset has been simulated by a market simulator for example with the Monte Carlo method. Our method is built from work on penalized filtering techniques and is applied on a grid of...

American Monte Carlo is a solution to the puzzle of calculating the value of derivatives with the right to an early exercise, when using Monte Carlo simulation. One of the technique uses regression of some suitable basis functions, which is a bit arbitrary, and could if made wrong render in...

There are a couple of well-known unsatisfactory properties in the notion of effective demand defined by Benassy and one by Dreze. This is why recent authors in disequilibrium analysis study the stochastic rationing mechanism. Douglas Gale proved the existence of the equilibrium with stochastic...

This paper considers the problem of calculating optimal policy rules to stabilize fluctuations in investment in an economy where firms' investment behavior can be described by a dynamic optimization model. In the optimization model, the dynamics of investment are generated by heterogeneous...

In this paper, we investigate the following problem: How can a financial institution, which has sold an option to a client, optimally hedge the payoff of this option by investing into a stock and into the option itself? Optimality is measured in terms of minimal variance and the associated...

The application of the Cauchy distribution has often been discussed as a potential model of the financial markets. In particular the way in which single extreme, or "Black Swan'', events can impact long term historical moments, is often cited. In this article we show how one can construct...

In [2], and [13], financial models based on the Wick product, and White Noise formalism are suggested. Although the original purpose is to incorporate integrals with respect to fractional Brownian motion, it is also pointed out in these articles, that this leads naturally to a quantum mechanical...

Techniques of regulated Brownian motion are used to analyze the behavior of the exchange rate when official policy reaction functions are subject to future stochastic changes. We examine exchange-rate dynamics in alternative cases where the authorities promise (i) to confine a floating rate...