Related papers: Asymptotic Power Utility-Based Pricing and Hedging
This paper considers exponential utility indifference pricing for a multidimensional non-traded assets model, and provides two linear approximations for the utility indifference price. The key tool is a probabilistic representation for the…
We consider statistical estimation of superhedging prices using historical stock returns in a frictionless market with d traded assets. We introduce a plugin estimator based on empirical measures and show it is consistent but lacks suitable…
We study dynamic optimal portfolio allocation for monotone mean--variance preferences in a general semimartingale model. Armed with new results in this area we revisit the work of Cui, Li, Wang and Zhu (2012, MAFI) and fully characterize…
This paper investigates Merton's portfolio problem in a rough stochastic environment described by Volterra Heston model. The model has a non-Markovian and non-semimartingale structure. By considering an auxiliary random process, we solve…
This paper develops a coupled model for day-ahead electricity prices and average daily temperature which allows to model quanto weather and energy derivatives. These products have gained on popularity as they enable to hedge against both…
We propose the use of statistical emulators for the purpose of valuing mortality-linked contracts in stochastic mortality models. Such models typically require (nested) evaluation of expected values of nonlinear functionals of…
We study utility maximization problem for general utility functions using dynamic programming approach. We consider an incomplete financial market model, where the dynamics of asset prices are described by an $R^d$-valued continuous…
The paper develops multiplicative compensation for complex-valued semimartingales and studies some of its consequences. It is shown that the stochastic exponential of any complex-valued semimartingale with independent increments becomes a…
We consider a utility-maximization problem in a general semimartingale financial model, subject to constraints on the number of shares held in each risky asset. These constraints are modeled by predictable convex-set-valued processes whose…
We consider stochastic volatility dynamics driven by a general H\"older continuous Volterra-type noise and with unbounded drift. For these so-called SVV-models, we consider the explicit computation of quadratic hedging strategies. While the…
The choice of admissible trading strategies in mathematical modelling of financial markets is a delicate issue, going back to Harrison and Kreps (1979). In the context of optimal portfolio selection with expected utility preferences this…
We provide a new algorithm for solving Risk Sensitive Partially Observable Markov Decisions Processes, when the risk is modeled by a utility function, and both the state space and the space of observations is finite. This algorithm is based…
We study utility maximization for power utility random fields with and without intermediate consumption in a general semimartingale model with closed portfolio constraints. We show that any optimal strategy leads to a solution of the…
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…
This article studies the sensitivity of the power utility maximization problem with respect to the investor's relative risk aversion, the statistical probability measure, the investment constraints and the market price of risk. We extend…
This paper considers options pricing when the assumption of normality is replaced with that of the symmetry of the underlying distribution. Such a market affords many equivalent martingale measures (EMM). However we argue (as in the…
We discuss stochastic modeling of volatility persistence and anti-correlations in electricity spot prices, and for this purpose we present two mean-reverting versions of the multifractal random walk (MRW). In the first model the…
Prediction markets are long known for prediction accuracy. This study systematically explores the fundamental properties of prediction markets, addressing questions about their information aggregation process and the factors contributing to…
This paper considers utility indifference valuation of derivatives under model uncertainty and trading constraints, where the utility is formulated as an additive stochastic differential utility of both intertemporal consumption and…
Existence of stochastic financial equilibria giving rise to semimartingale asset prices is established under a general class of assumptions. These equilibria are expressed in real terms and span complete markets or markets with withdrawal…