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present the Monte-Carlo method for European and American option pricing with the sample path generation and calibrate model …
Persistent link: https://www.econbiz.de/10012484130
We propose a tractable dynamic framework for the joint determination of optimal consumption, portfolio choice, and healthcare irreversible investment. Our model is based on a Merton's portfolio and consumption problem, where, in addition, the agent can choose the time at which undertaking a...
Persistent link: https://www.econbiz.de/10013466319
This paper examines the retirement decision, optimal investment, and consumption strategies under an age-dependent force of mortality. We formulate the optimization problem as a combined stochastic control and optimal stopping problem with a random time horizon, featuring three state variables:...
Persistent link: https://www.econbiz.de/10014433470
We show that debt is sustainable at a competitive equilibrium based solely on the reputation for repayment; that is, even without collateral or legal sanctions available to creditors. In an incomplete asset market, when the rate of interest falls recurrently below the rate of growth of the...
Persistent link: https://www.econbiz.de/10012806557
We use supervised machine learning to approximate the expectations typically contained in the optimality conditions of an economic model in the spirit of the parameterized expectations algorithm (PEA) with stochastic simulation. When the set of state variables is generated by a stochastic...
Persistent link: https://www.econbiz.de/10014496944
Arbitrage and liquidity are interrelated. Liquidity facilitates arbitrageurs’ trading on deviations from the law of one … price. However, whether arbitrage opportunity leads to an increase or decrease in liquidity depends on the cause of the … arbitrage and liquidity influence each other in the world’s largest platinum futures markets on exchanges in New York and Tokyo …
Persistent link: https://www.econbiz.de/10014284282
In this work, we adapt a Monte Carlo algorithm introduced by Broadie and Glasserman in 1997 to price a π-option. This method is based on the simulated price tree that comes from discretization and replication of possible trajectories of the underlying asset's price. As a result, this algorithm...
Persistent link: https://www.econbiz.de/10012293283
Since the collapse of the Metallgesellschaft AG due to hedging losses in 1993, energy practitioners have been concerned … hedging long-dated futures and options with their short-dated counterparts, we find that the long-term tracking errors are, on …
Persistent link: https://www.econbiz.de/10012626875
, and the transaction cost and market friction are considered in building the arbitrage-free spread interval. By comparing … Treasury futures. We find that there are many arbitrage opportunities among the three varieties, and the market is not fully … Treasury futures market will lead to higher market efficiency, shorter duration of arbitrage opportunities, and a faster return …
Persistent link: https://www.econbiz.de/10014518583
-related portfolio should diversify to Philippine equity. From hedging effectiveness and risk-adjusted-performance perspectives, oil is …
Persistent link: https://www.econbiz.de/10012418412