Related papers: Pricing Fixed-Income Securities in an Information-…
We present a unified, market-complete model that integrates both the Bachelier and Black-Scholes-Merton frameworks for asset pricing. The model allows for the study, within a unified framework, of asset pricing in a natural world that…
We propose a formulation to construct new classes of financial price processes based on the insight that the key variable driving prices $P$ is the earning-over-price ratio $\gamma \simeq 1/P$, which we refer to as the earning yield and is…
Data are invaluable. How can we assess the value of data objectively, systematically and quantitatively? Pricing data, or information goods in general, has been studied and practiced in dispersed areas and principles, such as economics,…
Although transmission of a data packet containing sensory information in a networked control system improves the quality of regulation, it has indeed a price from the communication perspective. It is, therefore, rational that such a data…
We propose a machine learning method to solve a mean-field game price formation model with common noise. This involves determining the price of a commodity traded among rational agents subject to a market clearing condition imposed by…
A common assumption in financial engineering is that the market price for any derivative coincides with an objectively defined risk-neutral price - a plausible assumption only if traders collectively possess objective knowledge about the…
We study the dynamic pricing of discrete goods over a finite selling horizon. One way to capture both the elastic and stochastic reaction of purchases to price is through a model where sellers control the intensity of a counting process,…
We investigate a statistical-static hedging technique for pricing assets considered as single-step stochastic cash flows. The valuation is based on constructing in a canonical way a European style derivative on a benchmark security such…
We introduce a class of short-rate models that exhibit a ``higher for longer'' phenomenon. Specifically, the short-rate is modeled as a general time-homogeneous one-factor Markov diffusion on a finite interval. The lower endpoint is assumed…
We propose a general framework for reduced-rank modeling of matrix-valued data. By applying a generalized nuclear norm penalty we can directly model low-dimensional latent variables associated with rows and columns. Our framework flexibly…
This paper tackles challenges in pricing and revenue projections due to consumer uncertainty. We propose a novel data-based approach for firms facing unknown consumer type distributions. Unlike existing methods, we assume firms only observe…
The accelerated development in Grid and peer-to-peer computing has positioned them as promising next generation computing platforms. They enable the creation of Virtual Enterprises (VE) for sharing resources distributed across the world.…
In this paper we analyze how market prices change in response to information processing among the market participants and how non-linear information dynamics drive market price movement. We analyze historical data of the SP 500 market for…
Under proportional transaction costs, a price process is said to have a consistent price system, if there is a semimartingale with an equivalent martingale measure that evolves within the bid-ask spread. We show that a continuous,…
A risk-neutral valuation framework is developed for pricing and hedging in-play football bets based on modelling scores by independent Poisson processes with constant intensities. The Fundamental Theorems of Asset Pricing are applied to…
Building on ideas from online convex optimization, we propose a general framework for the design of efficient securities markets over very large outcome spaces. The challenge here is computational. In a complete market, in which one…
We formulate one methodology to put a value or price on knowledge using well accepted techniques from finance. We provide justifications for these finance principles based on the limitations of the physical world we live in. We start with…
Technology trends as digitalization and Industry 4.0 initiate a growing demand for new business models. Most of this models requires a fundamental shift of operational and financial risks between seller and buyer. A key question is…
The diffusion of financial news into market prices is a complex process, making it challenging to evaluate the connections between news events and market movements. This paper introduces FININ (Financial Interconnected News Influence…
In the present paper we fill an essential gap in the Convertible Bonds pricing world by deriving a Binary Tree based model for valuation subject to credit risk. This model belongs to the framework known as Equity to Credit Risk. We show…