Related papers: Pricing Fixed-Income Securities in an Information-…
This review summarizes the historical development of probability measures in asset pricing, from early mathematical finance and state price theory to risk-neutral valuation, martingale measures, forward measures, stochastic discount…
Pricing advanced data products - particularly in complex fields such as semiconductor manufacturing - is a fundamentally challenging task due to the sparsity of publicly available transaction data, and its frequent heterogeneity and…
We propose how to quantify high-frequency market sentiment using high-frequency news from NASDAQ news platform and support vector machine classifiers. News arrive at markets randomly and the resulting news sentiment behaves like a…
We consider a fixed-price mechanism design setting where a seller sells one item via a social network, but the seller can only directly communicate with her neighbours initially. Each other node in the network is a potential buyer with a…
A well-interpretable measure of information has been recently proposed based on a partition obtained by intersecting a random sequence with its moving average. The partition yields disjoint sets of the sequence, which are then ranked…
How to compute (super) hedging costs in rather general fi- nancial market models with transaction costs in discrete-time ? Despite the huge literature on this topic, most of results are characterizations of the super-hedging prices while it…
We price European options in a class of models in which the volatility of the underlying risky asset depends on the short rate of interest. Our study results in an explicit pricing formula that depends on knowledge of a characteristic…
We propose an option approach for pricing bond illiquidity that is reminiscent of the celebrated work of Longstaff (1995) on the non-marketability of some non-dividend-paying shares in IPOs. This approach describes a quite common situation…
In this article, we study the problem of pricing defaultable bond with discrete default intensity and barrier under constant risk free short rate using higher order binary options and their integrals. In our credit risk model, the risk free…
We present a methodology for representing probabilistic relationships in a general-equilibrium economic model. Specifically, we define a precise mapping from a Bayesian network with binary nodes to a market price system where consumers and…
We consider an individual or household endowed with an initial capital and an income, modeled as a deterministic process with a continuous drift rate. At first, we model the discounting rate as the price of a zero-coupon bond at zero under…
The existence of the pricing kernel is shown to imply the existence of an ambient information process that generates market filtration. This information process consists of a signal component concerning the value of the random variable X…
The growth of machine-readable data in finance, such as alternative data, requires new modeling techniques that can handle non-stationary and non-parametric data. Due to the underlying causal dependence and the size and complexity of the…
We consider a pair of traders in a market where the information available to the second trader is a strict subset of the information available to the first trader. The traders make prices based on the information available concerning a…
Stochastic volatility models describe asset prices $S_t$ as driven by an unobserved process capturing the random dynamics of volatility $\sigma_t$. Here, we quantify how much information about $\sigma_t$ can be inferred from asset prices…
The analysis of markets with indivisible goods and fixed exogenous prices has played an important role in economic models, especially in relation to wage rigidity and unemployment. This research report provides a mathematical and…
A unified analytical pricing framework with involvement of the shot noise random process has been introduced and elaborated. Two exactly solvable new models have been developed. The first model has been designed to value options. It is…
We study the pricing of credit derivatives with asymmetric information. The managers have complete information on the value process of the firm and on the default threshold, while the investors on the market have only partial observations,…
Dynamic feature selection, where we sequentially query features to make accurate predictions with a minimal budget, is a promising paradigm to reduce feature acquisition costs and provide transparency into a model's predictions. The problem…
The paper tests the validity of the critique of the fiscal theory of the price level. A stochastic general equilibrium model with continuous time is constructed. An active fiscal policy and a passive monetary policy have been set. Monetary…