Related papers: Asymptotic Power Utility-Based Pricing and Hedging
Asymptotic error distribution for approximation of a stochastic integral with respect to continuous semimartingale by Riemann sum with general stochastic partition is studied. Effective discretization schemes of which asymptotic conditional…
The effectiveness of utility-maximization techniques for portfolio management relies on our ability to estimate correctly the parameters of the dynamics of the underlying financial assets. In the setting of complete or incomplete financial…
This paper provides a new version of the condition of Di Nunno et al. (2003), Ankirchner and Imkeller (2005) and Biagini and \{O}ksendal (2005) ensuring the semimartingale property for a large class of continuous stochastic processes.…
In this article we consider risk-sensitive control of semi-Markov processes with a discrete state space. We consider general utility functions and discounted cost in the optimization criteria. We consider random finite horizon and infinite…
Energy companies need efficient procedures to perform market calibration of stochastic models for commodities. If the Black framework is chosen for option pricing, the bottleneck of the market calibration is the computation of the variance…
In this paper we study mean-variance hedging under the G-expectation framework. Our analysis is carried out by exploiting the G-martingale representation theorem and the related probabilistic tools, in a contin- uous financial market with…
We consider the consumption-based asset pricing model, derive a new modified basic pricing equation, and present its successive approximations using the Taylor series expansions of the investor's utility during the averaging time interval.…
A mixed semiclassical initial value representation expression for spectroscopic calculations is derived. The formulation takes advantage of the time-averaging filtering and the hierarchical properties of different trajectory based…
A general method to construct recombinant tree approximations for stochastic volatility models is developed and applied to the Heston model for stock price dynamics. In this application, the resulting approximation is a four tuple Markov…
This paper proposes a risk-averse approach to energy storage price arbitrage, leveraging conformal uncertainty quantification for electricity price predictions. The method addresses the significant challenges posed by the inherent…
We conduct the first rigorous study of electricity price volatility for the full panel of electricity prices across three European generation zones. By interpreting the observed day-ahead prices as local averages of a latent price process…
We solve the problem of super-hedging European or Asian options for discrete-time financial market models where executable prices are uncertain. The risky asset prices are not described by single-valued processes but measurable selections…
We explore the role that random arbitrage opportunities play in hedging financial derivatives. We extend the asymptotic pricing theory presented by Fedotov and Panayides [Stochastic arbitrage return and its implication for option pricing,…
We consider the problem of exponential utility indifference valuation under the simplified framework where traded and nontraded assets are uncorrelated but where the claim to be priced possibly depends on both. Traded asset prices follow a…
We study the valuation and hedging problem of European options in a market subject to liquidity shocks. Working within a Markovian regime-switching setting, we model illiquidity as the inability to trade. To isolate the impact of such…
Based on forward curves modelled as Hilbert-space valued processes, we analyse the pricing of various options relevant in energy markets. In particular, we connect empirical evidence about energy forward prices known from the literature to…
We consider a stochastic volatility asset price model in which the volatility is the absolute value of a continuous Gaussian process with arbitrary prescribed mean and covariance. By exhibiting a Karhunen-Lo\`{e}ve expansion for the…
The important application of semi-static hedging in financial markets naturally leads to the notion of quasi self-dual processes. The focus of our study is to give new characterizations of quasi self-duality for exponential L\'evy processes…
We present an option pricing formula for European options in a stochastic volatility model. In particular, the volatility process is defined using a fractional integral of a diffusion process and both the stock price and the volatility…
We revisit the problem of maximizing expected logarithmic utility from consumption over an infinite horizon in the Black-Scholes model with proportional transaction costs, as studied in the seminal paper of Davis and Norman [Math. Operation…