Related papers: Information, Inflation, and Interest
We consider a financial market in discrete time and study pricing and hedging conditional on the information available up to an arbitrary point in time. In this conditional framework, we determine the structure of arbitrage-free prices.…
This note develops an arbitrage theory for a discrete-time market model without the assumption of the existence of a num\'eraire asset. Fundamental theorems of asset pricing are stated and proven in this context. The distinction between the…
Over the last decade, dividends have become a standalone asset class instead of a mere side product of an equity investment. We introduce a framework based on polynomial jump-diffusions to jointly price the term structures of dividends and…
We extend the fundamental theorem of asset pricing to a model where the risky stock is subject to proportional transaction costs in the form of bid-ask spreads and the bank account has different interest rates for borrowing and lending. We…
We develop a version of the fundamental theorem of asset pricing for discrete-time markets with proportional transaction costs and model uncertainty. A robust notion of no-arbitrage of the second kind is defined and shown to be equivalent…
This paper presents an overview of information-based asset pricing. In this approach, an asset is defined by its cash-flow structure. The market is assumed to have access to "partial" information about future cash flows. Each cash flow is…
In financial markets valuable information is rarely circulated homogeneously, because of time required for information to spread. However, advances in communication technology means that the 'lifetime' of important information is typically…
In this article we consider an optimization problem of expected utility maximization of continuous-time trading in a financial market. This trading is constrained by a benchmark for a utility-based shortfall risk measure. The market…
Income- and price-elasticity of demand quantify the responsiveness of markets to changes in income, and in prices, respectively. Under the assumptions of utility maximization and preference-independence (additive preferences), mathematical…
We propose a continuous time model for financial markets with proportional transactions costs and a continuum of risky assets. This is motivated by bond markets in which the continuum of assets corresponds to the continuum of possible…
This paper presents a stochastic model for discrete-time trading in financial markets where trading costs are given by convex cost functions and portfolios are constrained by convex sets. The model does not assume the existence of a cash…
The money supply is endogenous if the monetary policy strategy is the so called Inflation and Interest Rate Targeting, IRT. With that and perfect credibility, the theory of the price level and inflation only needs the Fisher equation, but…
This work presents an asset pricing model that under rational expectation equilibrium perspective shows how, depending on risk aversion and noise volatility, a risky-asset has one equilibrium price that differs in term of efficiency: an…
We propose a model for the joint evolution of European inflation, the European Central Bank official interest rate and the short-term interest rate, in a stochastic, continuous time setting. We derive the valuation equation for a contingent…
We apply the concepts of utility based pricing and hedging of derivatives in stochastic volatility markets and introduce a new class of "reciprocal affine" models for which the indifference price and optimal hedge portfolio for pure…
We present an arbitrage free theoretical framework for modeling bid and ask prices of dividend paying securities in a discrete time setup using theory of dynamic acceptability indices. In the first part of the paper we develop the theory of…
Since exchange economy considerably varies in the market assets, asset prices have become an attractive research area for investigating and modeling ambiguous and uncertain information in today markets. This paper proposes a new generative…
The comparative statics of the optimal portfolios across individuals is carried out for a continuous-time complete market model, where the risky assets price process follows a joint geometric Brownian motion with time-dependent and…
We prove the Fundamental Theorem of Asset Pricing for a discrete time financial market where trading is subject to proportional transaction cost and the asset price dynamic is modeled by a family of probability measures, possibly…
We model the dynamics of asset prices and associated derivatives by consideration of the dynamics of the conditional probability density process for the value of an asset at some specified time in the future. In the case where the price…