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Is Jump Risk Priced? What We Can (and Cannot) Learn From Option Hedging Errors

Branger, Nicole; Schlag, Christian - 2004

option hedging errors. We derive a closed-form solution for the option hedging error and its expecta- tion in a stochastic …, the expected hedging error cannot identify the exact structure of the compensation for jump risk. Furthermore, we derive … closed form solutions for the expected option hedging error under discrete trading and model mis-specification. Compared to …

Persistent link: https://www.econbiz.de/10010316083

Optimal Control of Linear Stochastic Systems with Singular Costs, and the Mean-Variance Hedging Problem with Stochastic Market Conditions

Kohlmann, Michael; Shanjian, Tang - 2000

, applications are given to the mean-variance hedging problem with random market conditions, and an explicit characterization for the … optimal hedging portfolio is given in terms of the adapted solution of the associated backward stochastic Riccati differential …

Persistent link: https://www.econbiz.de/10010324035

Recent Advances in Backward Stochastics Riccati Equations and Their Applications

Kohlmann, Michael; Tang, Shanjian - 2000

The following backward stochastic Riccati differential equation (BSRDE in short) is motivated, and is then studied. Some properties are presented. The existence and uniqueness of a global adapted solution to a BSRDE has been open for the case D i 6= 0 for more than two decades. Our recent...

Persistent link: https://www.econbiz.de/10010324042

The Informed and Uninformed Agent's Price of a Contingent Claim

Kohlmann, Michael; Zhou, Xun Yu - 1999

both the classical and the Föllmer-Schweizer hedging case. …

Persistent link: https://www.econbiz.de/10010324069

Global Adapted Solution of One-Dimensional Backward Stochastic Riccati Equations, with Application to the Mean-Variance Hedging

Kohlmann, Michael; Tang, Shanjian - 2000

applied to solve the mean-variance hedging problem with stochastic market conditions. …

Persistent link: https://www.econbiz.de/10010324079

A diffusion approximation to the Markov chains model of the financial market and the expected riskless profit under selling of call and put options

Nagaev, Alexander V.; Nagaev, Sergei A.; Kunst, Robert M. - 2005

A discrete time model of financial markets is considered. It is assumed that the stock price evolution is described by a homogeneous Markov chain. In the focus of attention is the expected value of the guaranteed profit of the investor that arises when the jumps of the stock price are bounded....

Persistent link: https://www.econbiz.de/10010293729

A diffusion approximation for the riskless profit under selling of discrete time call options: Non-identically distributed jumps

Nagaev, Alexander V.; Nagaev, Sergei A.; Kunst, Robert M. - 2005

A discrete time model of financial markets is considered. It is assumed that the relative jumps of the risky security price are independent non-identically distributed random variables. In the focus of attention is the expected non-risky profit of the investor that arises when the jumps of the...

Persistent link: https://www.econbiz.de/10010293743

Effectiveness of Hedging Strategies under Model Misspecification and Trading Restrictions

Dudenhausen, Antje - 2002

We consider a standard two-player all-pay auction with private values, where the valuation for the object is private information to each bidder. The crucial feature is that one bidder is favored by the allocation rule in the sense that he need not bid as much as the other bidder to win the...

Persistent link: https://www.econbiz.de/10010263054

Continuous time regime switching models and applications in estimating processes with stochastic volatility and jumps

Chourdakis, Kyriakos - 2002

A regime switching model in continuous time is introduced where a variety of jumps are allowed in addition to the diffusive component. The characteristic function of the process is derived in closed form, and is subsequently employed to create the likelihood function. In addition, standard...

Persistent link: https://www.econbiz.de/10010284206

Building Neural Network Models for Time Series: A Statistical Approach

Medeiros, Marcelo C.; Terasvirta, Timo; Rech, Gianluigi - 2002

This paper is concerned with modelling time series by single hidden layer feedforward neural network models. A coherent modelling strategy based on statistical inference is presented. Variable selection is carried out using existing techniques. The problem of selecting the number of hidden units...

Persistent link: https://www.econbiz.de/10011807289