Indifference valuation in incomplete binomial models

Abstract The indifference valuation problem in incomplete binomial models is analyzed. The model is more general than the ones studied so far, because the stochastic factor, which generates the market incompleteness, may affect the transition propabilities and/or the values of the traded asset as well as the claim's payoff. Two pricing algorithms are constructed which use, respectively, the minimal martingale and the minimal entropy measures. We study in detail the interplay among the different kinds of market incompleteness, the pricing measures and the price functionals. The dependence of the prices on the choice of the trading horizon is discussed. The family of "almost complete" (reduced) binomial models is also studied. It is shown that the two measures and the associated price functionals coincide, and that the effects of the horizon choice dissipate

An Assessment of Contagion Risks in the Banking System Using Non- Parametric and Copula Approaches

This study endeavours to shed some light on the Contagion risk in the Vietnamese banking system. In so doing, we analyse the contagion risk through stock returns on listed commercial banks by employing non-parametric and Copula approaches. A rich set of empirical approaches are employed, including non-parametric (Chi-plots, Kendall-plots) and parametric Copula estimations to define the dependence structure of pairs of daily returns, balanced by a total of 36 copulas with 17,456 observations over the period from July 2006 to September 2017. Our results show that the risk of each individual bank may transmit to other banks through stock returns, which are reflected in their price information. The results also suggest existence of contagion risk and strong dependency in the structure of stock returns of banks under analysis. As a consequence, to avoid negative returns for the portfolio, careful diversification is required while investing in the Vietnamese banking sector, when showing a Clayton relationship (left-tail dependency). Our findings have profound implications for investors, policymakers and authorities responsible for financial stability

Death of the high street: identification, prevention, reinvention

Location is of paramount importance within the retail sector, yet defining locational obsolescence remains overlooked, despite significant concerns over the viability of parts of the complex sector. This paper reviews the existing literature and, through this, explores retail locational obsolescence, including the multi-spatial nature of the driving forces that range from the global economy, local markets and submarkets, to individual property-specific factors; and, crucially, the need to disentangle locational obsolescence from other important concepts such as depreciation and functional obsolescence that are often mistakenly used. Through this, a conceptual model, definition and diagnostic criteria are presented to guide future studies, policy development and the allocation of resources. Importantly, three stages are presented to enable the operationalization of the model, essential to future academic and industry studies as well as the ongoing development of policy in this economically important, complex and contentious area

Systemic importance of financial institutions: regulations, research, open issues, proposals

In the field of risk management, scholars began to bring together the quantitative methodologies with the banking management issues about 30 years ago, with a special focus on market, credit and operational risks. After the systemic effects of banks defaults during the recent financial crisis, and despite a huge amount of literature in the last years concerning the systemic risk, no standard methodologies have been set up to now. Even the new Basel 3 regulation has adopted a heuristic indicator-based approach, quite far from an effective quantitative tool. In this paper, we refer to the different pieces of the puzzle: definition of systemic risk, a set of coherent and useful measures, the computability of these measures, the data set structure. In this challenging field, we aim to build a comprehensive picture of the state of the art, to illustrate the open issues, and to outline some paths for a more successful future research. This work appropriately integrates other useful surveys and it is directed to both academic researchers and practitioners