I study the limit of a large random economy, where a set of consumers invests in financial instruments engineered by banks, in order to optimize their future consumption. This exercise shows that, even in the ideal case of perfect competition, where full information is available to all market participants, the equilibrium develops a marked vulnerability (or susceptibility) to market imperfectio...

The purpose of this primer is to clarify some of the key characteristics of the over-the-counter (OTC) derivatives markets. A clearer picture of these markets will help legislators and regulators write better legislation and rules for the prudential regulation of OTC derivatives markets. (Note that this Primer is followed by a short list of key definitions used to describe OTC derivatives marke...

A financial derivative, for example an option, is an instrument (contract) whose value depends on the values of some underlying variables, where the underlying can be a commodity, an interest rate, stock, a stock index, a currency, to mention just a few examples. The financial derivatives market is enormous and is regularly reported to be worth $500 trillion. Derivatives provide an efficient wa...

We present an axiomatic characterization of price measures that are superadditive and comonotonic additive for normally distributed random variables. The price representation derived, involves a probability measure transform that is closely related to the Esscher transform, and we call it the Esscher-Girsanov transform. In a financial market in which the primary asset price is represented by a ...

However, due to the ever-changing conditions in financial markets, these instruments have further been used for speculative purposes and arbitrage opportunities. Nevertheless, this paper focuses on influence of derivative usage hedging profitability firms Turkish nonlife insurance industry. The data consists 25 non-life companies operating Turkey from 2009 2019, inclusive. findings based panel ...