Standard derivative pricing theory is based on the assumption of the market for the underlying asset being infinitely elastic. We relax this hypothesis and study if and how a large agent whose trades move prices can replicate the payoff of a derivative contract. Our analysis extends a prior work...

We study risk-minimizing hedging-strategies for derivatives in a model where the asset price follows a marked point process with stochastic jump-intensity, which depends on some unobservable state-variable process. This model reflects stylized facts that are typical for high frequency data. We...

In the paper we analyse in what way the implementation of dynamic hedging strategies affects the volatility of the underlying asset. To this end we first construct an economy where equilibrium prices are given by the classical Black- Scholes model of geometric Brownian Motion. Then we add...

If calibrated to an observed term structure of interest rates that only covers a finite range of times-to-maturity an HJM-model of the term structure of interest rates will eventually die out in finite time as bonds reach maturity. This poses problems for the pricing and hedging of certain...

This paper deals with the valuation and the hedging of non-path-dependent European options on one or several underlying assets in a model of an international economy allowing for both, interest rate risk and exchange rate risk. Using martingale theory and, in particular, the change of numeraire...

The present paper analyses a broad range of one- and multifactor models of the term structure of interest rates. We assess the influence of the number of factors, mean reversion, and the factor probability distributions on the term structure shapes the models generate, and use spread options as...