This paper investigates the pricing of discrete knock-out options with tree methods. As is well known, the naive application of the binomial model can result in erroneous prices, even if the number of time steps is large. We develop a correction technique for the binomial and trinomial model...

This paper evaluates the performance of various factor models with firm-specific variables in forecasting correlation matrices at the German stock market. We investigate forecasts of correlations for a comprehensive sample and a sample of blue chips and analyze the impact of stock market crashes...