Related papers: Hedging in an equilibrium-based model for a large …
We present a model describing the competition between information transmission and decision making in financial markets. The solution of this simple model is recalled, and possible variations discussed. It is shown numerically that despite…
In this paper, we describe a novel agent-based approach for modelling the transaction cost of buying or selling an asset in financial markets, e.g., to liquidate a large position as a result of a margin call to meet financial obligations.…
In the paper a problem of risk measures on a discrete-time market model with transaction costs is studied. Strategy effectiveness and shortfall risk is introduced. This paper is a generalization of quantile hedging presented in [4].
We consider models of financial markets in which all parties involved find incentives to participate. Strategies are evaluated directly by their virtual wealths. By tuning the price sensitivity and market impact, a phase diagram with…
This paper studies the robust reinsurance and investment games for competitive insurers. Model uncertainty is characterized by a class of equivalent probability measures. Each insurer is concerned with relative performance under the…
What is the demand elasticity of statistical arbitrageurs that invest according to the advice of modern cross-sectional asset pricing models? Thirteen models from the literature exhibit strikingly inelastic demand, in contrast to classical…
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…
The studied model was suggested to design a perfect hedging strategy for a large trader. In this case the implementation of a hedging strategy affects the price of the underlying security. The feedback-effect leads to a nonlinear version of…
We study risk-sharing economies where heterogenous agents trade subject to quadratic transaction costs. The corresponding equilibrium asset prices and trading strategies are characterised by a system of nonlinear, fully-coupled…
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 introduce a stochastic heterogeneous interacting-agent model for the short-time non-equilibrium evolution of excess demand and price in a stylized asset market. We consider a combination of social interaction within peer groups and…
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 is concerned with the study of insurance related derivatives on financial markets that are based on non-tradable underlyings, but are correlated with tradable assets. We calculate exponential utility-based indifference prices,…
The classical discrete time model of proportional transaction costs relies on the assumption that a feasible portfolio process has solvent increments at each step. We extend this setting in two directions, allowing for convex transaction…
We apply the concepts of utility based pricing and hedging of derivatives in stochastic volatility markets and introduce a new class of "reciprocal affine" models for which the indifference price and optimal hedge portfolio for pure…
We propose a simple market model where agents trade different types of products with each other by using money, relying only on local information. Value fluctuations of single products, combined with the condition of maximum profit in…
We propose a model for hedging in a market with jumps for a large investor. The dynamics of the stock prices and the value process is governed by forward-backward SDEs driven by Teugels martingales. Unlike known FBSDE market models, ours…
An agent-based model for financial markets has to incorporate two aspects: decision making and price formation. We introduce a simple decision model and consider its implications in two different pricing schemes. First, we study its…
Models necessarily capture only parts of a reality. Prediction models aim at capturing a future reality. In this paper we address the question of how the future is constructed (or: imagined) in an investment context where market…
This paper proposes a theory of stock market predictability patterns based on a model of heterogeneous beliefs. In a discrete finite time framework, some agents receive news about an asset's fundamental value through a noisy signal. The…