Both introductory surveys and results of individual research on a selection of six issues of modern finance form the content of this volume: * The Hybrid Model and Related Approaches to Capital Market Equilibria * Portfolio Decisions and Capital Market Equilibria under Incom- plete Information (by Volker Firchau) * Option Valuation: Theory and Empirical Evidence (by Robert Geske and Siegfried Trautmann) * The Value of Security Agreements (by Bernd Rudolph) * Asset Pricing in a Small Economy: A Test of the Omitted Assets Model (by Eduardo S. Schwartz and Michael J. Brennan) * The Simple Analytics of Arbitrage. The main idea was to help students in their work and to provide material for seminars. The book originated from a cooperation between the authors coming from the USA, Canada, and West Germany. Support was granted by the Allianz Lebensversicherung Stuttgart, the Badenia Bausparkasse Karlsruhe, the Landeszentralbank in Baden-Wurttemberg, and the Stifterverband fUr die Deutsche Wirtschaft. Finally, we want to express our thanks to Birgit Emmrich for her help during the different stages of manuscript preparation, and, last but not least, to Werner A. Muller from the Springer-Verlag for the readiness to publish our volume.

This volume invites young scientists and doctoral students in the fields of capital market theory, informational economics, and mana gement science to visualize the many different ways to arrive at a thorough understanding of risk and capital. Rather than focusing on one subject only, the sample of papers collected may be viewed as a representative choice of various aspects. Some contributions have more the character of surveys on the state of the art while others stress original research. We fou d it proper to group the papers under two main themes. Part I covers information, risk aversion, and capital market theory. Part II is devoted to management, policy, and empirical evidence. Two contributions, we think, deserved to break this allocation and to be placed in a prologue. The ideas expressed by Jost B. Walther, although meant as opening address, draw interesting parallels for risk and capital in genetics and evolution. An old, fundamental pro blem was asked and solved by Martin J. Beckmann: how does risk affect saving? The wise answer (Martin's 60th birthday is in July 1984) is both smart and simple, although the proof requires sophisticated dynamic programming. As always, such a work must be the result of a special occasion."