Most dimension reduction methods based on nonparametric smoothing are highly sensitive to outliers and to data coming from heavy-tailed distributions. We show that the recently proposed methods by Xia et al. (2002) can be made robust in such a way that preserves all advantages of the original...

Options are financial derivatives that, conditional on the price of an underlyingasset, constitute a right to transfer the ownership of this underlying. Morespecifically, a European call and put options give their owner the right to buyand sell, respectively, at a fixed strike price at a given...

Credit scoring methods became standard tool of banks and other financial institutions, direct marketing retailers and advertising companies to estimate whether an applicant for credit/goods will pay back his liabilities. In this thesis we give a short overview of credit scoring and its methods....

The software XploRe offers many nice tools for modelling implied trinomial trees (ITT’s). ITT is an option pricing technique which tries to fit the market volatility smile. It uses an inductive algorithm constructing a possible evolution process of underlying prices from the current market...

Implied trinomial trees (ITTs) present an analogous extension of trinomial trees proposed by Derman, Kani, and Chriss (1996). Like their binomial counterparts, they can fit the market volatility smile and actually converge to the same continuous limit as binomial trees. In addition, they allow...