Related papers: Asymptotic Power Utility-Based Pricing and Hedging
This article establishes an asymptotic theory for volatility estimation in an infinite-dimensional setting. We consider mild solutions of semilinear stochastic partial differential equations and derive a stable central limit theorem for the…
We consider the moderate deviations behaviors for two (co-) volatility estima-tors: generalised bipower variation, Hayashi-Yoshida estimator. The results are obtained by using a new result about the moderate deviations principle for…
In a context of illiquidity, the reservation price is a well-accepted alternative to the usual martingale approach which does not apply. However, this price is not available in closed form and requires numerical methods such as Monte Carlo…
We introduce the notion of relative volatility/intermittency and demonstrate how relative volatility statistics can be used to estimate consistently the temporal variation of volatility/intermittency when the data of interest are generated…
A key issue in the estimation of energy hedges is the hedgers' attitude towards risk which is encapsulated in the form of the hedgers' utility function. However, the literature typically uses only one form of utility function such as the…
Recently, the volatility associated with marginal prices has increased due to large scale integration of renewable generation. Price volatility is undesirable from a consumer perspective. To address this issue, we present a framework for…
The mean-variance hedging (MVH) problem is studied in a partially observable market where the drift processes can only be inferred through the observation of asset or index processes. Although most of the literatures treat the MVH problem…
In this paper we provide an asymptotic analysis of generalised bipower measures of the variation of price processes in financial economics. These measures encompass the usual quadratic variation, power variation and bipower variations which…
In quantitative finance, we often model asset prices as a noisy Ito semimartingale. As this model is not identifiable, approximating by a time-changed Levy process can be useful for generative modelling. We give a new estimate of the…
In this paper we propose a novel pricing-hedging framework for volatility derivatives which simultaneously takes into account rough volatility and volatility jumps. Our model directly targets the instantaneous variance of a risky asset and…
In frictionless markets, utility maximization problems are typically solved either by stochastic control or by martingale methods. Beginning with the seminal paper of Davis and Norman [Math. Oper. Res. 15 (1990) 676--713], stochastic…
Asymptotic properties of Markov Processes, such as steady state probabilities or hazard rate for absorbing states can be efficiently calculated by means of linear algebra even for large-scale problems. This paper discusses the methods for…
This paper studies the problem of option replication in general stochastic volatility markets with transaction costs, using a new specification for the volatility adjustment in Leland's algorithm \cite{Leland}. We prove several limit…
We study the sensitivity of the expected utility maximization problem in a continuous semi-martingale market with respect to small changes in the market price of risk. Assuming that the preferences of a rational economic agent are modeled…
This paper considers exponential utility indifference pricing for a multidimensional non-traded assets model subject to inter-temporal default risk, and provides a semigroup approximation for the utility indifference price. The key tool is…
Calibration to a surface of option prices requires specifying a suitably flexible martingale model for the discounted asset price under a risk-neutral measure. Assuming Brownian noise and mean-square integrability, we construct an…
We present an approach for pricing European call options in presence of proportional transaction costs, when the stock price follows a general exponential L\'{e}vy process. The model is a generalization of the celebrated work of Davis,…
This paper formulates a model of utility for a continuous time framework that captures the decision-maker's concern with ambiguity about both volatility and drift. Corresponding extensions of some basic results in asset pricing theory are…
We construct a statistical indicator for the detection of short-term asset price bubbles based on the information content of bid and ask market quotes for plain vanilla put and call options. Our construction makes use of the martingale…
We price and replicate a variety of claims written on the log price $X$ and quadratic variation $[X]$ of a risky asset, modeled as a positive semimartingale, subject to stochastic volatility and jumps. The pricing and hedging formulas do…