Related papers: Pricing and hedging of derivatives based on non-tr…
We consider the problem of pricing derivatives written on some industrial loss index via utility indifference pricing. The industrial loss index is modelled by a compound Poisson process and the insurer can adjust her portfolio by choosing…
This work addresses the problem of optimal pricing and hedging of a European option on an illiquid asset Z using two proxies: a liquid asset S and a liquid European option on another liquid asset Y. We assume that the S-hedge is dynamic…
In this paper we investigate the hedging problem of a unit-linked life insurance contract via the local risk-minimization approach, when the insurer has a restricted information on the market. In particular, we consider an endowment…
A derivative is a financial security whose value is a function of underlying traded assets and market outcomes. Pricing a financial derivative involves setting up a market model, finding a martingale (``fair game") probability measure for…
This article presents a deep reinforcement learning approach to price and hedge financial derivatives. This approach extends the work of Guo and Zhu (2017) who recently introduced the equal risk pricing framework, where the price of a…
In the spirit of Arrow-Debreu, we introduce a family of financial derivatives that act as primitive securities in that exotic derivatives can be approximated by their linear combinations. We call these financial derivatives signature…
In this paper we study the pricing and hedging of nonreplicable contingent claims, such as long-term insurance contracts like variable annuities. Our approach is based on the benchmark-neutral pricing framework of Platen (2024), which…
This paper considers the optimal portfolio selection problem in a dynamic multi-period stochastic framework with regime switching. The risk preferences are of exponential (CARA) type with an absolute coefficient of risk aversion which…
This paper formulates an utility indifference pricing model for investors trading in a discrete time financial market under non-dominated model uncertainty. The investors preferences are described by strictly increasing concave random…
We show how inter-asset dependence information derived from market prices of options can lead to improved model-free price bounds for multi-asset derivatives. Depending on the type of the traded option, we either extract correlation…
This paper studies the optimal investment problem with random endowment in an inventory-based price impact model with competitive market makers. Our goal is to analyze how price impact affects optimal policies, as well as both pricing rules…
Utility based methods provide a very general theoretically consistent approach to pricing and hedging of securities in incomplete financial markets. Solving problems in the utility based framework typically involves dynamic programming,…
The inclusion of DVA in the fair-value of derivative transactions has now become standard accounting practice in most parts of the world. Furthermore, some sophisticated banks are including an FVA (Funding Valuation Adjustment), but since…
In this paper, we consider the problem of optimal investment by an insurer. The insurer invests in a market consisting of a bank account and $m$ risky assets. The mean returns and volatilities of the risky assets depend nonlinearly on…
This thesis develops equilibrium asset pricing models in incomplete markets with a large number of heterogeneous agents using mean field game theory. The market equilibrium is characterized by a novel form of mean field backward stochastic…
We introduce a criterion how to price derivatives in incomplete markets, based on the theory of growth optimal strategy in repeated multiplicative games. We present reasons why these growth-optimal strategies should be particularly relevant…
Travel time derivatives are financial instruments that derive their value from road travel times, serving as an underlying asset that cannot be directly traded. Within the transportation domain, these derivatives are proposed as a more…
We consider a general local-stochastic volatility model and an investor with exponential utility. For a European-style contingent claim, whose payoff may depend on either a traded or non-traded asset, we derive an explicit approximation for…
We develop a robust framework for pricing and hedging of derivative securities in discrete-time financial markets. We consider markets with both dynamically and statically traded assets and make minimal measurability assumptions. We obtain…
This paper studies the problem of maximizing the expected utility of terminal wealth for a financial agent with an unbounded random endowment, and with a utility function which supports both positive and negative wealth. We prove the…