Quantile Hedging

In a complete financial market every contingent claim can be hedged perfectly. In an incomplete market it is possible to stay on the safe side by superhedging. But such strategies may require a large amount of initial capital. Here we study the question what an investor can do who is unwilling to spend that much, and who is ready to use a hedging strategy which succeeds with high probability

Optional Decomposition and Lagrange Multipliers

Let Q be the set of equivalent martingale measures for a given process S, and let X be a process which is a local supermartingale with respect to any measure in Q. The optional decomposition theorem for X states that there exists a predictable integrand ф such that the difference X−ф•S is a decreasing process. In this paper we give a new proof which uses techniques from stochastic calculus rather than functional analysis, and which removes any boundedness assumption

The Financial Crisis and the Systemic Failure of Academic Economics

The economics profession appears to have been unaware of the long build-up to the current worldwide financial crisis and to have significantly underestimated its dimensions once it started to unfold. In our view, this lack of understanding is due to a misallocation of research efforts in economics. We trace the deeper roots of this failure to the profession’s focus on models that, by design, disregard key elements driving outcomes in real-world markets. The economics profession has failed in communicating the limitations, weaknesses, and even dangers of its preferred models to the public. This state of affairs makes clear the need for a major reorientation of focus in the research economists undertake, as well as for the establishment of an ethical code that would ask economists to understand and communicate the limitations and potential misuses of their models.financial crisis, academic moral hazard, ethic responsibility of researchers

The Financial Crisis and the Systemic Failure of Academic Economics

The economics profession appears to have been unaware of the long build-up to the current worldwide financial crisis and to have significantly underestimated its dimensions once it started to unfold. In our view, this lack of understanding is due to a misallocation of research efforts in economics. We trace the deeper roots of this failure to the profession’s focus on models that, by design, disregard key elements driving outcomes in real-world markets. The economics profession has failed in communicating the limitations, weaknesses, and even dangers of its preferred models to the public. This state of affairs makes clear the need for a major reorientation of focus in the research economists undertake, as well as for the establishment of an ethical code that would ask economists to understand and communicate the limitations and potential misuses of their models.financial crisis; academic moral hazard; ethic responsibility of researchers

The Code of Protest. Images of Peace in the West German Peace Movements, 1945-1990

The article examines posters produced by the peace movements in the Federal Republic of Germany during the ColdWar, with an analytical focus on the transformation of the iconography of peace in modernity. Was it possible to develop an independent, positive depiction of peace in the context of protests for peace and disarmament? Despite its name, the pictorial selfrepresentation of the campaign ‘Fight against Nuclear Death’ in the late 1950s did not draw on the theme of pending nuclear mass death. The large-scale protest movement in the 1980s against NATO’s 1979 ‘double-track’ decision contrasted female peacefulness with masculine aggression in an emotionally charged pictorial symbolism. At the same time this symbolism marked a break with the pacifist iconographic tradition that had focused on the victims of war. Instead, the movement presented itself with images of demonstrating crowds, as an anticipation of its peaceful ends. Drawing on the concept of asymmetrical communicative ‘codes’ that has been developed in sociological systems theory, the article argues that the iconography of peace in peace movement posters could not develop a genuinely positive vision of peace, since the code of protest can articulate the designation value ‘peace’ only in conjunction with the rejection value ‘war’

One-sided versus two-sided stochastic descriptions

It is well-known that discrete-time finite-state Markov Chains, which are described by one-sided conditional probabilities which describe a dependence on the past as only dependent on the present, can also be described as one-dimensional Markov Fields, that is, nearest-neighbour Gibbs measures for finite-spin models, which are described by two-sided conditional probabilities. In such Markov Fields the time interpretation of past and future is being replaced by the space interpretation of an interior volume, surrounded by an exterior to the left and to the right. If we relax the Markov requirement to weak dependence, that is, continuous dependence, either on the past (generalising the Markov-Chain description) or on the external configuration (generalising the Markov-Field description), it turns out this equivalence breaks down, and neither class contains the other. In one direction this result has been known for a few years, in the opposite direction a counterexample was found recently. Our counterexample is based on the phenomenon of entropic repulsion in long-range Ising (or "Dyson") models.Comment: 13 pages, Contribution for "Statistical Mechanics of Classical and Disordered Systems