Related papers: Robust pricing and hedging of double no-touch opti…
We design three continuous--time models in finite horizon of a commodity price, whose dynamics can be affected by the actions of a representative risk--neutral producer and a representative risk--neutral trader. Depending on the model, the…
We investigate the pricing of financial options under the 2-hypergeometric stochastic volatility model. This is an analytically tractable model that reproduces the volatility smile and skew effects observed in empirical market data. Using a…
It is shown that delta hedging provides the optimal trading strategy in terms of minimal required initial capital to replicate a given terminal payoff in a continuous-time Markovian context. This holds true in market models where no…
Deep hedging (Buehler et al. 2019) is a versatile framework to compute the optimal hedging strategy of derivatives in incomplete markets. However, this optimal strategy is hard to train due to action dependence, that is, the appropriate…
I construct a novel random double auction as a robust bilateral trading mechanism for a profit-maximizing intermediary who facilitates trade between a buyer and a seller. It works as follows. The intermediary publicly commits to charging a…
This paper studies the problem of hedging and pricing a European call option under proportional transaction costs, from two complementary perspectives. We first derive the optimal hedging strategy under CARA utility, following the…
The research presented in this work is motivated by recent papers by Brigo et al. (2011), Burgard and Kjaer (2009), Cr\'epey (2012), Fujii and Takahashi (2010), Piterbarg (2010) and Pallavicini et al. (2012). Our goal is to provide a sound…
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…
The purpose of this work is to explore the role that arbitrage opportunities play in pricing financial derivatives. We use a non-equilibrium model to set up a stochastic portfolio, and for the random arbitrage return, we choose a stationary…
In a fixed time horizon, appropriately executing a large amount of a particular asset -- meaning a considerable portion of the volume traded within this frame -- is challenging. Especially for illiquid or even highly liquid but also highly…
We consider a generic market model with a single stock and with random volatility. We assume that there is a number of tradable options for that stock with different strike prices. The paper states the problem of finding a pricing rule that…
We prove the Fundamental Theorem of Asset Pricing for a discrete time financial market where trading is subject to proportional transaction cost and the asset price dynamic is modeled by a family of probability measures, possibly…
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…
We examine fixed-price mechanisms in bilateral trade through the lens of regret minimization. Our main results are twofold. (i) For independent values, a near-optimal $\widetilde{\Theta}(T^{2/3})$ tight bound for $\textsf{Global Budget…
The existence of time-lagged cross-correlations between the returns of a pair of assets, which is known as the lead-lag relationship, is a well-known stylized fact in financial econometrics. Recently some continuous-time models have been…
Non-equilibrium phenomena occur not only in physical world, but also in finance. In this work, stochastic relaxational dynamics (together with path integrals) is applied to option pricing theory. A recently proposed model (by Ilinski et…
The objective of this paper is to introduce the theory of option pricing for markets with informed traders within the framework of dynamic asset pricing theory. We introduce new models for option pricing for informed traders in complete…
In this paper, we consider the discrete-time setting, and the market model described by (S,F,T)$. Herein F is the ``public" flow of information which is available to all agents overtime, S is the discounted price process of d-tradable…
A leveraged ETF is a fund aimed at achieving a rate of return several times greater than that of the underlying asset such as Nikkei 225 futures. Recently, it has been suggested that rebalancing trades of a leveraged ETF may destabilize the…
We prove a robust super-hedging duality result for path-dependent options on assets with jumps, in a continuous time setting. It requires that the collection of martingale measures is rich enough and that the payoff function satisfies some…