Polynomial processes and their applications to mathematical finance

We introduce a class of Markov processes, called m-polynomial, for which the calculation of (mixed) moments up to order m only requires the computation of matrix exponentials. This class contains affine processes, processes with quadratic diffusion coefficients, as well as Lévy-driven SDEs with affine vector fields. Thus, many popular models such as exponential Lévy models or affine models are covered by this setting. The applications range from statistical GMM estimation procedures to new techniques for option pricing and hedging. For instance, the efficient and easy computation of moments can be used for variance reduction techniques in Monte Carlo methods.     

A general HJM framework for multiple yield curve modelling

We propose a general framework for modelling multiple yield curves which have emerged after the last financial crisis. In a general semimartingale setting, we provide an HJM approach to model the term structure of multiplicative spreads between FRA rates and simply compounded OIS risk-free forward rates. We derive an HJM drift and consistency condition ensuring absence of arbitrage and, in addition, we show how to construct models such that multiplicative spreads are greater than one and ordered with respect to the tenor’s length. When the driving semimartingale is an affine process, we obtain a flexible and tractable Markovian structure. Finally, we show that the proposed framework allows unifying and extending several recent approaches to multiple yield curve modelling.     

Wie weit tr?gt der Bachelor? Zum aktuellen Stand der Bologna-Reform in Deutschland

The Federal Ministry of Education and Research (BMBF) states that the Bologna Accords have been successfully implemented in Germany. However, empirical studies show that this can be very questionable. The aim to reduce the average study duration has not been accomplished mainly due to a higher than expected conversion rate from Bachelor to Master level. Although the Bachelor’s degree is broadly accepted among future employers, the majority of students do not trust the career opportunities with a Bachelor’s degree only and prefer to undertake a Master’s degree. In fact, the starting salaries for Bachelor’s degree graduates, especially from universities, are significantly lower than for the graduates holding a Diploma or a Master’s degree.     

Europe prepares for a single financial market

A single market in financial services has long been an objective of the European Union. In 1999, the Commission launched the Financial Services Action Plan (FSAP), an ambitious programme to integrate capital markets by 2005. This article gives an overview of the progress made so far and the tasks which still need to be tackled.     

Modes of foreign bank entry and effects on lending rates: Theory and evidence

Policy makers who decide to liberalize foreign bank entry frequently put limitations on the mode of entry. We study how different entry modes affect the lending rates of foreign and domestic banks. In our model, the mode of entry determines whether a foreign bank inherits a customer base. This, in turn, affects how information is distributed between foreign and domestic banks. We show that this distribution of information about incumbent customers leads to stronger competition if foreign entry occurs through a greenfield investment. As a result, domestic bank lending rates are lower after greenfield entry. We find empirical support for this prediction for a sample of banks from 10 Eastern European countries for the period 1995–2003.