Related papers: Superhedging in illiquid markets
In this paper, a new approach for solving the problems of pricing and hedging derivatives is introduced in a general frictionless market setting. The method is applicable even in cases where an equivalent local martingale measure fails to…
We consider an incomplete multi-asset binomial market model. We prove that for a wide class of contingent claims the extremal multi-step martingale measure is a power of the corresponding single-step extremal martingale measure. This allows…
We generalize classical results on the existence of optimal portfolios in discrete time frictionless market models to models with capital gains taxes. We consider the realistic but mathematically challenging rule that losses do not trigger…
We study the superreplication of contingent claims under model uncertainty in discrete time. We show that optimal superreplicating strategies exist in a general measure-theoretic setting; moreover, we characterize the minimal…
We review the nature of some well-known phenomena such as volatility smiles, convexity adjustments and parallel derivative markets. We propose that the market is incomplete and postulate the existence of intrinsic risks in every contingent…
In this note, we consider a general discrete time financial market with proportional transaction costs as in Kabanov and Stricker (2001), Kabanov et al. (2002), Kabanov et al. (2003) and Schachermayer (2004). We provide a dual formulation…
In this article we propose a study of market models starting from a set of axioms, as one does in the case of risk measures. We define a market model simply as a mapping from the set of adapted strategies to the set of random variables…
We present a framework for hedging a portfolio of derivatives in the presence of market frictions such as transaction costs, market impact, liquidity constraints or risk limits using modern deep reinforcement machine learning methods. We…
An agent-based modelling methodology for the joint price evolution of two stocks is put forward. The method models future multidimensional price trajectories reflecting how a class of agents rebalance their portfolios in an operational way…
We study indifference pricing of exotic derivatives by using hedging strategies that take static positions in quoted derivatives but trade the underlying and cash dynamically over time. We use real quotes that come with bid-ask spreads and…
We derive deterministic criteria for the existence and non-existence of equivalent (local) martingale measures for financial markets driven by multi-dimensional time-inhomogeneous diffusions. Our conditions can be used to construct…
Financial markets are often modelled as if time were unique and continuous across assets and markets. Financial markets are however asynchronous, order flow is event-driven, and waiting times between events are often random. Many of the…
Explicit robust hedging strategies for convex or concave payoffs under a continuous semimartingale model with uncertainty and small transaction costs are constructed. In an asymptotic sense, the upper and lower bounds of the cumulative…
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 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 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 study the effect of parameters uncertainties on a stochastic diffusion model, in particular the impact on the pricing of contingent claims, thanks to Dirichlet Forms methods. We apply recent techniques, developed by Bouleau, to hedging…
This paper presents an axiomatic scheme for interest rate models in discrete time. We take a pricing kernel approach, which builds in the arbitrage-free property and provides a link to equilibrium economics. We require that the pricing…
This paper develops a mathematical framework for the analysis of continuous-time trading strategies which, in contrast to the classical setting of continuous-time mathematical finance, does not rely on stochastic integrals or other…
This note continues investigation of randomness-type properties emerging in idealized financial markets with continuous price processes. It is shown, without making any probabilistic assumptions, that the strong variation exponent of…