Turbo-Certificates are one of the most popular structured equity products for private investors in Germany. They can be regarded as special forms of barrier options. The relation between the barrier level and the strike price is especially important for the design of these products. By using a...

We analyze price discovery in floor-based and electronic exchanges using data from the German stock market. We find that both markets contribute to price discovery. There is bidirectional Granger causality, and prices from both markets adjust to deviations from the long-run equilibrium. We use...

In this paper, we consider the net loss of a life insurance company issuing identical equity-linked pure endowment contracts in the case of periodic premiums. Under this construction, financial risks as well as the mortality risk are included. Based on Møller (1998), we particularly investigate...

The fluctuation of stock prices is modelled as a sequence of temporary equilibria on a financial market with different types of agents. We summarize joint work with M. Schweizer on the class of Ornstein-Uhlenbeck processes in a random environment which appears in the diffusion limit. Moreover,...

We demonstrate that in a CAPM economy Walras Law and the Tobin Separation Property characterize market demand in finite sets of prices. Consequently, for any number n there exist CAPM economies which have at least n equilibria and hence have n different beta pricing fomulas. It is shown that the...

We develop a new approach to pricing and hedging contingent claims in incomplete markets. Mimicking as closely as possible in an incomplete markets framework the no--arbitrage arguments that have been developed in complete markets leads us to defining the concept of pseudo--arbitrage. Building...

The Paper reports a basic Experiment on the option pricing approach. Each trader with an increasing utility for money values the option with his arbitrage free price, which is independent of the probability of the stock movement. The experimental data show that the traiders learn to exploit more...

This paper addresses the statistical properties of time series driven by rational bubbles a la Blanchard and Watson (1982). Using insights on the behavior of multiplicative stochastic processes, we demonstrate that the tails of the unconditional distribution emerging from such bubble processes...

In this survey we discuss models with level-dependent and stochastic volatility from the viewpoint of erivative asset analysis. Both classes of models are generalisations of the classical Black-Scholes model; they have been developed in an effort to build models that are flexible enough to cope...

Multi-fractal processes have been proposed as a new formalism for modeling the time series of returns in finance. The major attraction of these processes is their capability of generating various degrees of long-memory in different powers of returns - a feature that has been found to...