In this paper, the effects of so-called model misspecification and the effects of dropping the assumption that continuous rebalancing is possible are examined. Strategies which are robust if applied continuously fail to be robust if applied in discrete time. Therefore, the hedging bias which...

It is well-known that Gaussian hedging strategies are robust in the sense that they always lead to a cost process of bounded variation and that a superhedge is possible if upper bounds on the volatility of the relevant processes are available, cf. El Karoui, Jeanblanc-Picque and Shreve (1998)...

The effect of model and parameter misspecification on the effectiveness of Gaussian hedging strategies for derivative financial instruments is analyzed, showing that Gaussian hedges in the `natural'' hedging instruments are particularly robust. This is true for all models that imply...

In this paper we investigate the possibilities of Pareto-improving reforms of a pay-as-you-go (PAYG) pension system in a framework of endogenous growth. Belan et al. (1996) propose a transition of a PAYG system to a system of savings--subsidization. We follow this approach and prove that a...

The interaction of social security (based on the two pillars unemployment insurance and public pension system), unemployment, and economic growth is considered in an overlapping generations model with endogenous growth and efficiency wages. The impact of each worker's and employer's social...