Mathematical Finance: Workshop of the Mathematical Finance Research Project, Konstanz, Germany, October 5–7, 2000 (Trends in Mathematics)

The Year 2000 Is The Centenary Year Of The Publication Of Bachelier's Thesis Which - Together With Harry Markovitz Ph.d. Dissertation On Portfolio Selection In 1952 And Fischer Black's And Myron Scholes' Solution Of An Option Pricing Problem In 1973 - Is Considered As The Starting Point Of Modern Finance As A Mathematical Discipline. On This Remarkable Anniversary The Workshop On Mathematical Finance Held At The University Of Konstanz Brought Together Practitioners, Economists And Mathematicians To Discuss The State Of The Art. Apart From Contributions To The Known Discrete, Brownian, And Lévy Process Models, First Attempts To Describe A Market In A Reasonable Way By A Fractional Brownian Motion Model Are Presented, Opening Many New Aspects For Practitioners And New Problems For Mathematicians. As Most Dynamical Financial Problems Are Stochastic Filtering Or Control Problems Many Talks Presented Adaptations Of Control Methods And Techniques To The Classical Financial Problems In • Portfolio Selection • Irreversible Investment • Risk Sensitive Asset Allocation • Capital Asset Pricing • Hedging Contingent Claims • Option Pricing • Interest Rate Theory. The Contributions Of Practitioners Link The Theoretical Results To The Steadily Increasing Flow Of Real World Problems From Financial Institutions Into Mathematical Laboratories. The Present Volume Reflects This Exchange Of Theoretical And Applied Results, Methods And Techniques That Made The Workshop A Fruitful Contribution To The Interdisciplinary Work In Mathematical Finance. Edited By Michael Kohlmann, Shanjian Tang. Front Matter....Pages 1-18 On-line portfolio strategy with prediction....Pages 19-28 Continuous time financial market, transaction cost and transaction intensity....Pages 29-39 Demand Heterogeneity and Price Volatility....Pages 40-48 Optimal default boundary in a discrete time setting....Pages 49-58 An Infinite Factor Model for the Interest Rate Derivatives....Pages 59-68 Arbitrage and Pricing with Collateral....Pages 69-78 On the existence of optimal controls for a singular stochastic control problem in finance....Pages 79-88 A Quadratic Approach To Interest Rates Models In Incomplete Markets....Pages 89-98 Risk Sensitive Asset Management: Two Empirical Examples....Pages 99-110 Bounded Variation Singular Stochastic Control and Associated Dynkin Game....Pages 111-120 Option Pricing and Hedging Under Regular Lévy Processes of Exponential Type....Pages 121-130 Installment Options and Static Hedging....Pages 130-139 Fractional Brownian Motion and Financial Modelling....Pages 140-151 Stochastic Volatility and Epsilon-Martingale Decomposition....Pages 152-161 Mutual Debts Compensation as Graph Theory Problem....Pages 162-167 First Steps to Stochastic Finance....Pages 168-170 Fractional Calculus and Continuous-Time Finance III : the Diffusion Limit....Pages 171-180 Passport Options Outside the Black Scholes World....Pages 181-193 New Developments in Backward Stochastic Riccati Equations and Their Applications....Pages 194-214 Quantile hedging for a jump-diffusion finanaicl market model....Pages 215-229 Exponential formula and Girsanov theorem for mixed semilinear stochastic differential equations.....Pages 230-238 An introduction to optimal consumption with partial observation....Pages 239-249 Continuous Time CAPM, Price for Risk and Utility Maximization....Pages 250-260 LQ control and mean-variance portfolio selec-tions: The stochastic parameter case....Pages 261-270 Liquidity Risk in Energy Markets....Pages 271-282 Riccati Equation and Viscosity Solutions in Mean Variance Hedging....Pages 283-292 A Minimal Financial Market Model....Pages 293-301 A note on equivalent martingale measures with bounded density....Pages 302-306 Local optimality in the multi-dimensional multi-period mean-variance portfolio problem....Pages 307-316 Transaction Processes among Autonomous Traders....Pages 317-327 The Laplace transform approach to valuing exotic options: the case of the Asian option....Pages 328-338 Reversible Real Options....Pages 339-344 A Toolbox for Generalized Relative Entropies, EMM and Contingent Claim Valuation....Pages 345-354 Incremental Value-at-Risk: traps and misinter-pretations....Pages 355-364 On option expected returns....Pages 365-374 The year 2000 is the centenary year of the publication of Bachelier's thesis which - together with Harry Markovitz Ph. D. dissertation on portfolio selection in 1952 and Fischer Black's and Myron Scholes' solution of an option pricing problem in 1973 - is considered as the starting point of modern finance as a mathematical discipline. On this remarkable anniversary the workshop on mathematical finance held at the University of Konstanz brought together practitioners, economists and mathematicians to discuss the state of the art. Apart from contributions to the known discrete, Brownian, and Lvy process models, first attempts to describe a market in a reasonable way by a fractional Brownian motion model are presented, opening many new aspects for practitioners and new problems for mathematicians. As most dynamical financial problems are stochastic filtering or control problems many talks presented adaptations of control methods and techniques to the classical financial problems in portfolio selection irreversible investment risk sensitive asset allocation capital asset pricing hedging contingent claims option pricing interest rate theory. The contributions of practitioners link the theoretical results to the steadily increasing flow of real world problems from financial institutions into mathematical laboratories. The present volume reflects this exchange of theoretical and applied results, methods and techniques that made the workshop a fruitful contribution to the interdisciplinary work in mathematical finance The workshop on mathematical finance held at the University of Konstanz brought together practitioners, economists and mathematicians to discuss the advances in the field. This title shows the exchange of theoretical and applied results, methods and techniques that made the workshop a fruitful contribution to the work in the field.