Related papers: Indifference price with general semimartingales
We study the valuation and hedging problem of European options in a market subject to liquidity shocks. Working within a Markovian regime-switching setting, we model illiquidity as the inability to trade. To isolate the impact of such…
We consider the optimal investment and marginal utility pricing problem of a risk averse agent and quantify their exposure to a small amount of model uncertainty. Specifically, we compute explicitly the first-order sensitivity of their…
We consider an infinite dimensional optimization problem motivated by mathematical economics. Within the celebrated "Arbitrage Pricing Model", we use probabilistic and functional analytic techniques to show the existence of optimal…
Kramkov and Sirbu (2006, 2007) have shown that first-order approximations of power utility-based prices and hedging strategies can be computed by solving a mean-variance hedging problem under a specific equivalent martingale measure and…
In this paper we study a utility maximization problem with both optimal control and optimal stopping in a finite time horizon. The value function can be characterized by a variational equation that involves a free boundary problem of a…
We establish the weighted fractional Orlicz-Hardy inequalities for various Orlicz functions. Further, we identify the critical cases for each Orlicz function and prove the weighted fractional Orlicz-Hardy inequalities with logarithmic…
In this work we present two particular cases of the general duality result for linear optimisation problems over signed measures with infinitely many constraints in the form of integrals of functions with respect to the decision variables…
The seller's risk-indifference price evaluation is studied. We propose a dynamic risk-indifference pricing criteria derived from a fully-dynamic family of risk measures on the $L_p$-spaces for $p\in [1,\infty]$. The concept of fully-dynamic…
The presence of integer variables in the European day-ahead electricity market renders the social welfare maximization problem non-convex and non-differentiable, making classical marginal pricing theoretically inconsistent. Existing pricing…
Within a general semimartingale framework, we study the relationship between collective market efficiency and individual rationality. We derive a necessary and sufficient condition for the existence of (possibly zero-sum) exchanges among…
This article demonstrates how a large number of efficiency measures known in the literature in production economics can be interpreted through the notion of utility function, based on the concept of Stone-Geary utility. Several…
We study the dynamic indifference pricing with ambiguity preferences. For this, we introduce the dynamic expected utility with ambiguity via the nonlinear expectation--G-expectation, introduced by Peng (2007). We also study the risk…
A version of indifference valuation of a European call option is proposed that includes statistical regularities of nonstochastic randomness. Classical relations (forward contract value and Black-Scholes formula) are obtained as particular…
We deal with existence, uniqueness, and regularity for solutions of the boundary value problem $$ \begin{cases} {\mathcal L}^s u = \mu &\quad \text{in $\Omega$}, u(x)=0 \quad &\text{on} \ \ \mathbb{R}^N\backslash\Omega, \end{cases} $$ where…
We continue the analysis of our previous paper (Czichowsky/Schachermayer/Yang 2014) pertaining to the existence of a shadow price process for portfolio optimisation under proportional transaction costs. There, we established a positive…
In this article, we look at the effect of volatility clustering on the risk indifference price of options described by Sircar and Sturm in their paper (Sircar, R., & Sturm, S. (2012). From smile asymptotics to market risk measures.…
We investigate the links between various no-arbitrage conditions and the existence of pricing functionals in general markets, and prove the Fundamental Theorem of Asset Pricing therein. No-arbitrage conditions, either in this abstract…
The main objective of this paper is to look from the unique point of view at some phenomena arising in different areas of probability theory and mathematical statistics. We will try to understand what is common between classical…
We consider a financial market model with a single risky asset whose price process evolves according to a general jump-diffusion with locally bounded coefficients and where market participants have only access to a partial information flow.…
Suppose $\mu$ and $\nu$ are probability measures on $\mathbb R$ satisfying $\mu \leq_{cx} \nu$. Let $a$ and $b$ be convex functions on $\mathbb R$ with $a \geq b \geq 0$. We are interested in finding \[ \sup_{\mathcal M} \sup_{\tau}…