Related papers: Overview of utility-based valuation
We consider a discrete time financial market with proportional transaction costs under model uncertainty, and study a num\'eraire-based semi-static utility maximization problem with an exponential utility preference. The randomization…
In this paper, we consider a financial market with assets exposed to some risks inducing jumps in the asset prices, and which can still be traded after default times. We use a default-intensity modeling approach, and address in this…
We address the Merton problem of maximizing the expected utility of terminal wealth using techniques from variational analysis. Under a general continuous semimartingale market model with stochastic parameters, we obtain a characterization…
I present a novel mathematical technique for dealing with the infinities arising from divergent sums and integrals. It assigns them fine-grained infinite values from the set of hyperreal numbers in a manner that refines the standard…
Recent literature in the last Maximum Entropy workshop introduced an analogy between cumulative probability distributions and normalized utility functions. Based on this analogy, a utility density function can de defined as the derivative…
This article presents a generic model for pricing financial derivatives subject to counterparty credit risk. Both unilateral and bilateral types of credit risks are considered. Our study shows that credit risk should be modeled as American…
This paper studies the continuous time utility maximization problem on consumption with addictive habit formation in incomplete semimartingale markets. Introducing the set of auxiliary state processes and the modified dual space, we embed…
In most of microeconomic theory, consumers are assumed to exhibit decreasing marginal utilities. This paper considers combinatorial auctions among such submodular buyers. The valuations of such buyers are placed within a hierarchy of…
This paper sets out a framework for the valuation of insurance liabilities that is intended to be economically realistic, elementary, reasonably practically applicable, and as a special case to provide a basis for the valuation in…
We study a robust utility maximization problem in a general discrete-time frictionless market under quasi-sure no-arbitrage. The investor is assumed to have a random and concave utility function defined on the whole real-line. She also…
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…
Although the growth of share-based payments with performance conditions (hereafter, SPPC) is prominent today, the theoretical price of SPPC has not been sufficiently studied. Reflecting such a situation, the current accounting standards for…
Existing approaches to asset-pricing under model-uncertainty adapt classical utility-maximization frameworks and seek theoretical comprehensiveness. We move toward practice by considering binary model-risks and by emphasizing 'constraints'…
Interest has been growing in decision-focused machine learning methods which train models to account for how their predictions are used in downstream optimization problems. Doing so can often improve performance on subsequent decision…
Structured utility models are essential for the effective representation and elicitation of complex multiattribute utility functions. Generalized additive independence (GAI) models provide an attractive structural model of user preferences,…
We study arbitrage opportunities, market viability and utility maximization in market models with an insider. Assuming that an economic agent possesses from the beginning an additional information in the form of a random variable G, which…
Bayesian decision theory outlines a rigorous framework for making optimal decisions based on maximizing expected utility over a model posterior. However, practitioners often do not have access to the full posterior and resort to approximate…
We study regularity properties of the dynamic value functions of primal and dual problems of optimal investing for utility functions defined on the whole real line. Relations between decomposition terms of value processes of primal and dual…
A number of Bermudan option pricing methods that are applicable to options on multiple assets are studied in this thesis, one of the dominating questions being the natural scaling needed to extrapolate from Bermudan to American (both…
Value adjustment of uncollateralized trades is determined within a risk-neutral pricing framework. When hedging such trades, investors cannot freely trade protection on their own name, thus facing an incomplete market. This fact is…