Related papers: On Agents' Agreement and Partial-Equilibrium Prici…
A standing assumption in the literature on proportional transaction costs is efficient friction. Together with robust no free lunch with vanishing risk, it rules out strategies of infinite variation, as they usually appear in frictionless…
In a model with no given probability measure, we consider asset pricing in the presence of frictions and other imperfections and characterize the property of coherent pricing, a notion related to (but much weaker than) the no arbitrage…
Approximations to utility indifference prices are provided for a contingent claim in the large position size limit. Results are valid for general utility functions on the real line and semi-martingale models. It is shown that as the…
We consider thin incomplete financial markets, where traders with heterogeneous preferences and risk exposures have motive to behave strategically regarding the demand schedules they submit, thereby impacting prices and allocations. We…
In a model with no given probability measure, we consider asset pricing in the presence of frictions and other imperfections and characterize the property of coherent pricing, a notion related to (but much weaker than) the no arbitrage…
We consider the pricing problem facing a seller of a contingent claim. We assume that this seller has some general level of partial information, and that he is not allowed to sell short in certain assets. This pricing problem, which is our…
With model uncertainty characterized by a convex, possibly non-dominated set of probability measures, the agent minimizes the cost of hedging a path dependent contingent claim with given expected success ratio, in a discrete-time,…
A financial market model where agents trade using realistic combinations of buy-and-hold strategies is considered. Minimal assumptions are made on the discounted asset-price process - in particular, the semimartingale property is not…
We model an informed agent with information about the future value of an asset trying to maximize profits when subjected to a transaction cost as well as a market maker tasked with setting fair transaction prices. In a single auction model,…
We propose indifference pricing to estimate the value of the weak information. Our framework allows for tractability, quantifying the amount of additional information, and permits the description of the smallness and the stability with…
We introduce a two-agent problem which is inspired by price asymmetry arising from funding difference. When two parties have different funding rates, the two parties deduce different fair prices for derivative contracts even under the same…
All-pay auctions, a common mechanism for various human and agent interactions, suffers, like many other mechanisms, from the possibility of players' failure to participate in the auction. We model such failures, and fully characterize…
We study the formation of derivative prices in equilibrium between risk-neutral agents with heterogeneous beliefs about the dynamics of the underlying. Under the condition that the derivative cannot be shorted, we prove the existence of a…
We discuss the asymptotic behaviour of risk-based indifference prices of European contingent claims in discrete-time financial markets under volatility uncertainty as the number of intermediate trading periods tends to infinity. The…
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…
This paper studies the topic of cost-efficiency in incomplete markets. A payoff is called cost-efficient if it achieves a given probability distribution at some given investment horizon with a minimum initial budget. Extensive literature…
We study a financial model with a non-trivial price impact effect. In this model we consider the interaction of a large investor trading in an illiquid security, and a market maker who is quoting prices for this security. We assume that the…
We consider portfolio selection under nonparametric $\alpha$-maxmin ambiguity in the neighbourhood of a reference distribution. We show strict concavity of the portfolio problem under ambiguity aversion. Implied demand functions are…
We study arbitrage opportunities, market viability and utility maximization in market models with an insider. Assuming that an economic agent possesses from the beginning an additional information in the form of a random variable G, which…
Value adjustment of uncollateralized trades is determined within a risk-neutral pricing framework. When hedging such trades, investors cannot freely trade protection on their own name, thus facing an incomplete market. This fact is…