Related papers: Convex pricing by a generalized entropy penalty
We develop a pricing rule for life insurance under stochastic mortality in an incomplete market by assuming that the insurance company requires compensation for its risk in the form of a pre-specified instantaneous Sharpe ratio. Our…
This paper proposes to model asset price dynamics with a mixture of diffusion processes where the instantaneous volatility of the underlying diffusion process contains a random vector. The marginal probability distributions of the proposed…
In this paper we study dynamic pricing mechanism of contingent claims. A typical model of such pricing mechanism is the so-called g-expectation $E^g_{s,t}[X]$ defined by the solution of the backward stochastic differential equation with…
We propose a Bayesian nonparametric approach to modelling and predicting a class of functional time series with application to energy markets, based on fully observed, noise-free functional data. Traders in such contexts conceive profitable…
We introduce a simple framework in which market participants update their prior about an efficient price with a model-based learning process. We show that exponential intensities for the arrival of aggressive orders arise naturally in this…
Using a suitable change of probability measure, we obtain a novel Poisson series representation for the arbitrage- free price process of vulnerable contingent claims in a regime-switching market driven by an underlying continuous- time…
Entropy functionals (i.e. convex integral functionals) and extensions of these functionals are minimized on convex sets. This paper is aimed at reducing as much as possible the assumptions on the constraint set. Dual equalities and…
This paper studies the parabolic free boundary problem arising from pricing American-style put options on an asset whose index follows a geometric Brownian motion process. The contribution is to propose a condition for that the early…
This paper proposes a mixed-integer nonlinear programming approach for joint scheduling of long-term maintenance decisions and short-term production for groups of complex machines with multiple interacting components. We introduce an…
We consider a one-period market model composed by a risk-free asset and a risky asset with $n$ possible future values (namely, a $n$-nomial market model). We characterize the lower envelope of the class of equivalent martingale measures in…
In this paper we derive robust super- and subhedging dualities for contingent claims that can depend on several underlying assets. In addition to strict super- and subhedging, we also consider relaxed versions which, instead of eliminating…
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…
In this paper we study a continuous time stochastic inventory model for a commodity traded in the spot market and whose supply purchase is affected by price and demand uncertainty. A firm aims at meeting a random demand of the commodity at…
This paper considers general term structure models like the ones appearing in portfolio credit risk modelling or life insurance. We give a general model starting from families of forward rates driven by infinitely many Brownian motions and…
This paper develops a general theory on rates of convergence of penalized spline estimators for function estimation when the likelihood functional is concave in candidate functions, where the likelihood is interpreted in a broad sense that…
In this article we develop a general theory of exact parametric penalty functions for constrained optimization problems. The main advantage of the method of parametric penalty functions is the fact that a parametric penalty function can be…
This paper focuses on stochastic optimal control problems with constraints in law, which are rewritten as optimization (minimization) of probability measures problem on the canonical space. We introduce a penalized version of this type of…
In settings where full incentive-compatibility is not available, such as core-constraint combinatorial auctions and budget-balanced combinatorial exchanges, we may wish to design mechanisms that are as incentive-compatible as possible. This…
We consider a class of infinite-dimensional optimization problems in which a distributed vector-valued variable should pointwise almost everywhere take values from a given finite set $\mathcal{M}\subset\mathbb{R}^m$. Such hybrid…
Nonconvexities in markets with discrete decisions and nonlinear constraints make efficient pricing challenging, often necessitating subsidies. A prime example is the unit commitment (UC) problem in electricity markets, where costly…