The pricing kernel puzzle of Jackwerth (2000) concerns the fact that the empirical pricing kernel implied in S&P 500 index options and index returns is not monotonically decreasing in wealth as standard economic theory would suggest. Thus, those options are currently priced in a way such that...

This paper studies option pricing based on a reverse engineering (RE) approach. We utilize artificial intelligence in order to numerically compute the prices of options. The data consist of more than 5000 call- and put-options from the German stock market. First, we find that option pricing...

Prize Lecture to the memory of Alfred Nobel, December 9, 1997

Variations in fine wine prices can be prominent and have widespread economic and financial implications. Although fine wine investments are dominated by French wines, we demonstrate that significant international diversification benefits exist for investors in Italian, Australian and Portuguese...