Related papers: Pricing and hedging of derivatives based on non-tr…
This article prices OTC derivatives with either an exogenously determined initial margin profile or endogenously approximated initial margin. In the former case, margin valuation adjustment (MVA) is defined as the liability-side discounted…
A variance swap is a derivative with a path-dependent payoff which allows investors to take positions on the future variability of an asset. In the idealised setting of a continuously monitored variance swap written on an asset with…
Over the past few years quadratic Backward Stochastic Differential Equations (BSDEs) have been a popular field of research. However there are only very few examples where explicit solutions for these equations are known. In this paper we…
In the context of an incomplete market with a Brownian filtration and a fixed finite time horizon, this paper proves that for general dynamic convex risk measures, the buyer's and seller's risk indifference prices of a contingent claim are…
We consider the robust exponential utility maximization problem in discrete time: An investor maximizes the worst case expected exponential utility with respect to a family of nondominated probabilistic models of her endowment by…
In this work we study a continuous time exponential utility maximization problem in the presence of a linear temporary price impact. More precisely, for the case where the risky asset is given by the Ornstein-Uhlenbeck diffusion process we…
It is shown that delta hedging provides the optimal trading strategy in terms of minimal required initial capital to replicate a given terminal payoff in a continuous-time Markovian context. This holds true in market models where no…
This paper investigates the pricing of financial derivatives and the calculation of their delta Greek when the underlying asset is a jump-diffusion process in which the stochastic intensity component follows the CIR process. Utilizing…
This thesis develops a mathematical framework for the analysis of continuous-time trading strategies which, in contrast to the classical setting of continuous-time finance, does not rely on stochastic integrals or other probabilistic…
In this paper, we obtain a duality result for the exponential utility maximization problem where trading is subject to quadratic transaction costs and the investor is required to liquidate her position at the maturity date. As an…
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…
Models trained under assumptions in the complete market usually don't take effect in the incomplete market. This paper solves the hedging problem in incomplete market with three sources of incompleteness: risk factor, illiquidity, and…
We consider utility maximization problem for semi-martingale models depending on a random factor $\xi$. We reduce initial maximization problem to the conditional one, given $\xi=u$, which we solve using dual approach. For HARA utilities we…
In this article we derive partial differential equations (PDEs) for pricing interest rate derivatives under the generalized Forward Market Model (FMM) recently presented by A. Lyashenko and F. Mercurio in \cite{lyashenkoMercurio:Mar2019} to…
We investigate the optimal investment-reinsurance problem for insurance company with partial information on the market price of the risk. Through the use of filtering techniques we convert the original optimization problem involving…
We consider the problem of optimal hedging in an incomplete market with an established pricing kernel. In such a market, prices are uniquely determined, but perfect hedges are usually not available. We work in the rather general setting of…
We consider the problem of determining the L\'evy exponent in a L\'evy model for asset prices given the price data of derivatives. The model, formulated under the real-world measure $\mathbb P$, consists of a pricing kernel…
We study utility maximization problem for general utility functions using dynamic programming approach. We consider an incomplete financial market model, where the dynamics of asset prices are described by an $R^d$-valued continuous…
We use a continuous version of the standard deviation premium principle for pricing in incomplete equity markets by assuming that the investor issuing an unhedgeable derivative security requires compensation for this risk in the form of a…
We propose an optimal portfolio problem in the incomplete market where the underlying assets depend on economic factors with delayed effects, such models can describe the short term forecasting and the interaction with time lag among…