Related papers: On honest times in financial modeling
In the context of a general continuous financial market model, we study whether the additional information associated with an honest time gives rise to arbitrage profits. By relying on the theory of progressive enlargement of filtrations,…
By assuming the existence of the growth optimal portfolio (GOP), the stationarity of GOP-volatilities, and the maximization of relative entropy, the paper applies the benchmark approach to the modeling of the long-term dynamics of…
This paper quantifies the interplay between the non-arbitrage notion of No-Unbounded-Profit-with-Bounded-Risk (NUPBR hereafter) and additional information generated by a random time. This study complements the one of…
We consider a market model where there are two levels of information. The public information generated by the financial assets, and a larger flow of information that contains additional knowledge about a random time. This random time can…
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 a continuous-time financial market with continuous price processes under model uncertainty, modeled via a family $\mathcal{P}$ of possible physical measures. A robust notion ${\rm NA}_{1}(\mathcal{P})$ of no-arbitrage of the first…
We start with the idea that open quantum systems can be used to represent financial markets by modelling events from the external environment and their impact on the market price. We show how to characterize distinct orbits of the time…
Mandatory emission trading schemes are being established around the world. Participants of such market schemes are always exposed to risks. This leads to the creation of an accompanying market for emission-linked derivatives. To evaluate…
We consider a general class of diffusion-based models and show that, even in the absence of an Equivalent Local Martingale Measure, the financial market may still be viable, in the sense that strong forms of arbitrage are excluded and…
We present a short and self-contained proof of the following result: a random time is an honest time that avoids all stopping times if and only if it coincides with the (last) time of maximum of a nonnegative local martingale with zero…
We derive a general multivariate theory for realised characteristics of `model-free discretisation-invariant swaps', so-called because the standard no-arbitrage assumption of martingale forward prices is sufficient to derive fair-value swap…
Cover's celebrated theorem states that the long run yield of a properly chosen "universal" portfolio is as good as the long run yield of the best retrospectively chosen constant rebalanced portfolio. The "universality" pertains to the fact…
We present a generative approach to price options and extract risk-neutral densities from the market. Specifically, we model the underlying log-returns on the time-to-maturity continuum as a generative model from standard normal. Neural…
This study delves into the temporal dynamics within the equity market through the lens of bond traders. Recognizing that the riskless interest rate fluctuates over time, we leverage the Black-Derman-Toy model to trace its temporal…
We introduce a general framework for Markov decision problems under model uncertainty in a discrete-time infinite horizon setting. By providing a dynamic programming principle we obtain a local-to-global paradigm, namely solving a local,…
This paper provides a methodology for fast and accurate pricing of the long-dated contracts that arise as the building blocks of insurance and pension fund agreements. It applies the recursive marginal quantization (RMQ) and joint recursive…
The Black-Scholes-Merton model is a mathematical model for the dynamics of a financial market that includes derivative investment instruments, and its formula provides a theoretical price estimate of European-style options. The model's…
In this paper we study the quality of model-free valuation approaches for financial derivatives by systematically evaluating the difference between model-free super-hedging strategies and the realized payoff of financial derivatives using…
We study the problem of maximising terminal utility for an agent facing model uncertainty, in a frictionless discrete-time market with one safe asset and finitely many risky assets. We show that an optimal investment strategy exists if the…
We investigate the impact of capital gains taxes on optimal investment decisions in a quite simple model. Namely, we consider a risk neutral investor who owns one risky stock from which she assumes that it has a lower expected return than…