Risk capital allocation is based on the assumption that the risk of a homogeneous portfolio is scaled up and down with the portfolio size. In this article we show that this assumption is true for large portfolios, but has to be revised for small ones. On basis of numerical examples we calculate...

The gradient allocation principle, which generalizes the most popular specific allocation principles, is commonly proposed in the literature as a means of distributing a financial institution's risk capital to its constituents. This paper is concerned with the axioms defining the coherence of...

We develop a quantitative model for structured microfinance instruments, which are regarded as an important means for refinancing microfinance institutions. The quantitative credit risk model presented takes into account the peculiarities of microfinance institutions and can be used for pricing...

We derive the Green's function for the Black-Scholes partial differential equation with time-varying coefficients and time-dependent boundary conditions. We provide a thorough discussion of its implementation within a pricing algorithm that also accommodates American style options. Greeks can be...