Related papers: Overview of utility-based valuation

In order to find a way of measuring the degree of incompleteness of an incomplete financial market, the rank of the vector price process of the traded assets and the dimension of the associated acceptance set are introduced. We show that…

We consider an agent who has access to a financial market, including derivative contracts, who looks to maximise her utility. Whilst the agent looks to maximise utility over one probability measure, or class of probability measures, she…

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 develop a tractable model of realization utility that studies the role of reference-dependent S-shaped preferences in a dynamic investment setting with reinvestment. Our model generates both voluntarily realized gains and losses. It…

Utility based methods provide a very general theoretically consistent approach to pricing and hedging of securities in incomplete financial markets. Solving problems in the utility based framework typically involves dynamic programming,…

This paper introduces an information-based model for the pricing of storable commodities such as crude oil and natural gas. The model uses the concept of market information about future supply and demand as a basis for valuation. Physical…

We study a market model in which the volatility of the stock may jump at a random time from a fixed value to another fixed value. This model was already described in the literature. We present a new approach to the problem, based on partial…

We consider the pricing of derivatives written on the discretely sampled realized variance of an underlying security. In the literature, the realized variance is usually approximated by its continuous-time limit, the quadratic variation of…

We introduce a framework for incremental-decremental maximization that captures the gradual transformation or renewal of infrastructures. In our model, an initial solution is transformed one element at a time and the utility of an…

We extend the definitions of upper and lower valuations on partially ordered sets, and consider the metrics they induce, in particular the metrics available (or not) based on the logarithms of such valuations. Motivating applications in…

We study the utility maximization problem for power utility random fields in a semimartingale financial market, with and without intermediate consumption. The notion of an opportunity process is introduced as a reduced form of the value…

Models to price long term loans in the securities lending business are developed. These longer horizon deals can be viewed as contracts with optionality embedded in them. This insight leads to the usage of established methods from…

Valuation adjustments are nowadays a common practice to include credit and liquidity effects in option pricing. Funding costs arising from collateral procedures, hedging strategies and taxes are added to option prices to take into account…

This is the first part of a series of articles where we are going to develop theory of valuations on manifolds generalizing the classical theory of continuous valuations on convex subsets of a linear space. In this article we still work…

In this paper we present different ways to parametrize subsets of the space of valuations on $K[x]$ extending a given valuation on $K$. We discuss the methods using pseudo-Cauchy sequences and approximation types. The method presented here…

In this paper we investigate the applicability of a recently introduced primal-dual splitting method in the context of solving portfolio optimization problems which assume the minimization of risk measures associated to different convex…

Tackling the problem of ordinal preference revelation and reasoning, we propose a novel methodology for generating an ordinal utility function from a set of qualitative preference statements. To the best of our knowledge, our proposal…

We study an optimal consumption and investment problem in a possibly incomplete market with general, not necessarily convex, stochastic constraints. We give explicit solutions for investors with exponential, logarithmic and power utility.…

We examine the problem of optimal portfolio allocation within the framework of utility theory. We apply exponential utility to derive the optimal diversification strategy and logarithmic utility to determine the optimal leverage. We enhance…

Obtaining more accurate equity value estimates is the starting point for stock selection, value-based indexing in a noisy market, and beating benchmark indices through tactical style rotation. Unfortunately, discounted cash flow, method of…