Related papers: Behavioural and Dynamical Scenarios for Contingent…
In an incomplete market setting, we consider two financial agents, who wish to price and trade a non-replicable contingent claim. Assuming that the agents are utility maximizers, we propose a transaction price which is a result of the…
We consider two risk-averse financial agents who negotiate the price of an illiquid indivisible contingent claim in an incomplete semimartingale market environment. Under the assumption that the agents are exponential utility maximizers…
A solution to a portfolio optimization problem is always conditioned by constraints on the initial capital and the price of the available market assets. If a risk neutral measure is known, then the price of each asset is the discounted…
The problem of determining the European-style option price in the incomplete market has been examined within the framework of stochastic optimization. An analytic method based on the discrete dynamic programming equation (Bellman equation)…
In an incomplete semimartingale model of a financial market, we consider several risk-averse financial agents who negotiate the price of a bundle of contingent claims. Assuming that the agents' risk preferences are modelled by convex…
In order to find a way of measuring the degree of incompleteness of an incomplete financial market, the rank of the vector price process of the traded assets and the dimension of the associated acceptance set are introduced. We show that…
Risk-neutral pricing dictates that the discounted derivative price is a martingale in a measure equivalent to the economic measure. The residual ambiguity for incomplete markets is here resolved by minimising the entropy of the price…
In this paper, we propose an equilibrium pricing model in a dynamic multi-period stochastic framework with uncertain income streams. In an incomplete market, there exist two traded risky assets (e.g. stock/commodity and weather derivative)…
This paper studies the pricing of contingent claims of American style, using indifference pricing by fully dynamic convex risk measures. We provide a general definition of risk-indifference prices for buyers and sellers in continuous time,…
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…
This paper deals with applications of coherent risk measures to pricing in incomplete markets. Namely, we study the No Good Deals pricing technique based on coherent risk. Two forms of this technique are presented: one defines a good deal…
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…
A derivative is a financial security whose value is a function of underlying traded assets and market outcomes. Pricing a financial derivative involves setting up a market model, finding a martingale (``fair game") probability measure for…
We propose a pricing technique based on coherent risk measures, which enables one to get finer price intervals than in the No Good Deals pricing. The main idea consists in splitting a liability into several parts and selling these parts to…
We propose a pseudo-market solution to resource allocation problems subject to constraints. Our treatment of constraints is general: including bihierarchical constraints due to considerations of diversity in school choice, or scheduling in…
We introduce a criterion how to price derivatives in incomplete markets, based on the theory of growth optimal strategy in repeated multiplicative games. We present reasons why these growth-optimal strategies should be particularly relevant…
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 a dynamic pricing problem under unknown demand models. In this problem a seller offers prices to a stream of customers and observes either success or failure in each sale attempt. The underlying demand model is unknown to the…
Expanding the ideas of the author's paper 'Nonexpansive maps and option pricing theory' (Kibernetica 34:6 (1998), 713-724) we develop a pure game-theoretic approach to option pricing, by-passing stochastic modeling. Risk neutral…
The determination of acceptability prices of contingent claims requires the choice of a stochastic model for the underlying asset price dynamics. Given this model, optimal bid and ask prices can be found by stochastic optimization. However,…