This paper deals with the superhedging of derivatives on incomplete markets, i.e. with portfolio strategies which generate payoffs at least as high as that of a given contingent claim. The simplest solution to this problem is in many cases a static superhedge, i.e. a buy-and-hold strategy...

This paper provides an in-depth analysis of the properties of popular tests for the existence and the sign of the market price of volatility risk. These tests are frequently based on the fact that for some option pricing models under continuous hedging the sign of the market price of volatility...

Over-allotment arrangements are nowadays part of almost any initial public offering. The underwriting banks borrow stocks from the previous shareholders to issue more than the initially announced number of shares. This is combined with the option to cover this short position at the issue price....

This study addresses two questions: where does price discovery occur for internationally-traded firms and how do international stock prices adjust to an exchange rate shock? These questions are answered by analyzing quotes originating in New York and Frankfurt for three large German firms,...

This paper provides empirical evidence on initial returns and long-run performance of initial public offerings (IPOs) in Germany before World War I. In the literature it is often argued that a check for the robustness of existing results should be undertaken using different data sets and periods...

This paper examines continuous-time models for the price and volatility processes of individual stocks and the S\amp;P 100 index via Markov Chain Monte Carlo estimation. We find that the stochastic processes governing individual stocks are rather heterogeneous. A key result of our investigation...

There is a significant increase in trading volume on quarterly futures expiration days in Germany. Delays in the opening for the majority of index stocks indicate that a large part of this extraordinary volume is indeed traded right at the opening of the market. An increase in trading activity...

In this paper we consider the question which path-independent claims are attainable through self-financing trading strategies in an incomplete market. We show for continuous-time stochastic volatility models and for models exhibiting both stochastic volatility and jumps that from this special...

There is empirical evidence that the implied volatility smile for index options is significantly steeper than the smile for individual options. We propose a simple model setup that is able to explain this difference. When modelling the index, an aggregation restriction has to be taken into...

We study the method proposed by Flood and Rose (FR, 2004, 2005) for checking for financial integration by estimating the risk-free rate using the idiosyncratic component of individual stock returns. Performing simulations with data with a known return generation process, we find that the FR...