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The main purpose of the paper is to provide a mathematical background for the theory of bond markets similar to that available for stock markets. We suggest two constructions of stochastic integrals with respect to processes taking values in a space of continuous functions. Such integrals are...
restrictions. While asset price dynamics are assumed to be continuous time processes, the hedging of contingent claims occurs in … hedged. Based on the robustness result of Gaussian hedging strategies, saying that a superhedge is achieved for convex payoff … asset price trends, which can be avoided by discretising the hedging model instead of discretising the hedging strategies …
In this paper we study the expected utility maximization problem for discretetime incomplete financial markets. As shown by Xia and Yan (2000a, 2000b) in the continuous-time case, this problem can be solved by the martingale measure method. In a special discrete-time model, we explicitly work...
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...
support is derived for the spot rate return. The model permits the arbitrage free valuation of bond options and interest rate … options and produces dynamic portfolio strategies to duplicate these contracts. …
options on the S&P 500 futures expire (pinning) and are pushed away from the cost-of-carry adjusted at-the-money strike price … right before the expiration of options on the S&P 500 index (anti-cross-pinning). These effects are driven by the interplay … (and early exercise) of in-the-money options by individual investors. The associated shift in notional futures value is at …
This paper uses a dynamic optimization model to quantify the potential welfare gains of hedging against commodity price … risk for commodity-exporting countries. We show that hedging enhances domestic welfare through two channels: first, by …
cor-relations and volatility spillovers between crude oil and stock index returns, pricing exotic options using the Wang …: evidence from S&P100 index and equity options, the performance of commodity trading advi-sors: a mean-variance-ratio test … catastrophe options with counterparty risk, day of the week effect on the VIX - a parsimonious representation, equity and CDS …
which the risk management and hedging needs of investors may be effectively met through the derivative instruments. However …