Project B3:
Stochastic Models of Financial Markets

Director: Prof. Dr. Dieter Sondermann

  1. Arbitrage Theory and the Term Structure of Interest Rates
    (Sandmann, Schlögl, Schönbucher, Sondermann)

    This project comprises the following research topics:

    1. Modelling the Term Structure of Interest Rates
    2. Modelling of Security Markets with Default Risk
    3. Riskmanagement of Insurance Contracts with Financial Market Risk

    Recent publications in this field of research are
    • Miltersen, K., K. Sandmann, D. Sondermann: Closed Form Solutions for Term Structure Derivatives with Log-Normal Interest Rates, Journal of Finance, March 1997, SFB 303, University of Bonn, Discussion Paper No. B-308
    • Frey, R., D. Sommer (1996): A Systematic Approach to Pricing and Hedging International Derivatives with Interest Rate Risk: Analysis of International Derivatives under Stochastic Interest Rates, Applied Mathematical Finance 3, No. 4, pp. 295-318, SFB 303, University of Bonn, Discussion Paper No. B-306
    • Goldys, B., M. Musiela, D. Sondermann (1996): Lognormality of Rates and Term Structure Models, SFB 303, University of Bonn, Discussion Paper No. B-394
    • Nielsen, J.A., K. Sandmann (1996a): Uniqueness of the Fair Premium for Equity-Linked-Life-Contracts, The Geneva Papers on Risk and Insurance Theory 21, pp. 65-102, SFB 303, University of Bonn, Discussion Paper No. B-327
    • Nielsen, J.A., K. Sandmann (1996b): The Pricing of Asian Options Under Stochastic Interest Rates, Applied Mathematical Finance 3, pp. 209-236 SFB 303, University of Bonn, Discussion Paper No. B-323
    • Schlögl, E., D. Sommer (1996): Factor Models and the Shape of the Term Structure, SFB 303, University of Bonn, Discussion Paper No. B-395
    • Schönbucher, P. (1996): The Term Structure of Defaultable Bond Prices, SFB 303, University of Bonn, Discussion Paper No. B-384
    • Sandmann, K., D. Sondermann (1997): Log-Normal Interest Rate Models: Stability and Methodology, SFB 303, University of Bonn, Discussion Paper No. B-398

  2. Riskmanagement under Market Frictions
    (Dudenhausen, Leisen, Reimer, Schürger, Wiesenberg)

    This project comprises the following research topics:

    1. Modelling Arbitrage Free Asset Price Dynamics with Time- and State-dependent Volatility Functions
    2. Hedging under Stochastic Volatility
    3. Arbitrage Pricing under Transaction Costs
    4. Examining Convergence of Approximative Option Prices and Hedging Strategies obtained from Numerical Methods; Derivation of Improved Numerical Methods for Complex Option Contracts

    Recent publications in this field of research are
    • Frey, R. (1996): The Pricing and Hedging of Options in Finitely Elastic Markets, SFB 303, University of Bonn, Discussion Paper No. B-372
    • Leisen, D.P.J. (1996): Pricing the American Put Option: A Detailed Convergence Analysis for Binomial Models, SFB 303, University of Bonn, Discussion Paper No. B-366
    • Leisen, D.P.J., M. Reimer (1996): Binomial Models for Option Valuation - Examining and Improving Convergence, Applied Mathematical Finance 3, No. 4, pp. 319-346, SFB 303, University of Bonn, Discussion Paper No. B-309
    • Reimer, M., K. Sandmann (1995): A Discrete Time Approach for European and American Barrier Options, SFB 303, University of Bonn, Discussion Paper No. B-272
    • Schürger, K. (1996): On the Existence of Equivalent tau-measures in Finite Discrete Time, Stoch. Proc. Appl. 61, pp. 109-128

  3. Financial Markets Database
    (Look)

    This database is built up to allow for empirical studies of the international interest rate markets. We collect data of interest rates, interest rate options, swap yields, and currencies. Further work is devoted on automatic data recording, user interface, and documenting the recorded data.

Address:

University of Bonn
Institut für Gesellschafts- und Wirtschaftswissenschaften
Statistische Abteilung
Adenauerallee 24-26
D - 53113 Bonn / Germany

Phone: +49+0228+73 9263
Fax: +49+0228+73 9264

Researchers:

08.09.2000, © Webmaster