The introduction of derivatives on Bitcoin enables investors to hedge risk exposures in cryptocurrencies. Because of volatility swings and jumps in cryptocurrency prices, the traditional variance-based approach to obtain hedge ratios is infeasible. As a consequence, we consider two extensions of...

In Monte Carlo simulation, Latin hypercube sampling (LHS) [McKay et al. (1979)] is a well-known variance reduction technique for vectors of independent random variables. The method presented here, Latin hypercube sampling with dependence (LHSD), extends LHS to vectors of dependent random...

The payoff of many credit derivatives depends on the level of credit spreads. In particular, credit derivatives with a leverage component are subject to gap risk, a risk associated with the occurrence of jumps in the underlying credit default swaps. In the framework of first passage time models,...

The payoff of many credit derivatives depends on the level of credit spreads. In particular, the payoff of credit derivatives with a leverage component is sensitive to jumps in the underlying credit spreads. In the framework of first passage time models we extend the model introduced in...

Market risk management is one of the key factors to success in managing financial institutions. Underestimated risk can have desastrous consequences for individual companies and even whole economies, not least as could be seen during the recent crises. Overestimated risk, on the other side, may...

On May 10, 2012, JPMorgan Chase & Co. started to report losses on its London based credit derivative portfolio. To date, these losses have accumulated to roughly USD~6.2 billion. In this document, we consolidate publicly available information on the JPMorgan case to provide a detailed review of...

In a continuous-time setting where a risk-averse agent controls the drift of an output process driven by a Brownian motion, optimal contracts are linear in the terminal output; this result is well-known in a setting with moral hazard and - under stronger assumptions - adverse selection. Using...

Against the background of the reform wave of banking regulation and supervision over the world, we review the development path of banking regulation and supervision in China to understand how and in which direction the regulatory and supervisory framework in China evolved and how regulation and...

Starting from well-known empirical stylised facts of financial time series, we develop dynamic portfolio protection trading strategies based on econometric methods. As a criterion for riskiness we consider the evolution of the value-at-risk spread from a GARCH model with normal innovations...

Recently, a number of structured funds have emerged as public-private partnerships with the intent of promoting investment in renewable energy in emerging markets. These funds seek to attract institutional investors by tranching the asset pool and issuing senior notes with a high credit quality....