Related papers: Stock loans in incomplete markets
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…
This paper focuses on the pricing of the variance swap in an incomplete market where the stochastic interest rate and the price of the stock are respectively driven by Cox-Ingersoll-Ross model and Heston model with simultaneous L\'{e}vy…
We consider a general discrete-time financial market with proportional transaction costs as in [Kabanov, Stricker and R\'{a}sonyi Finance and Stochastics 7 (2003) 403--411] and [Schachermayer Math. Finance 14 (2004) 19--48]. In addition to…
The possibility of statistical evaluation of the market completeness and incompleteness is investigated for continuous time diffusion stock market models. It is known that the market completeness is not a robust property: small random…
We study the optimal portfolio liquidation problem over a finite horizon in a limit order book with bid-ask spread and temporary market price impact penalizing speedy execution trades. We use a continuous-time modeling framework, but in…
We study an optimal stopping problem with an unbounded, time-dependent and discontinuous reward function. This problem is motivated by the pricing of a variable annuity contract with guaranteed minimum maturity benefit, under the assumption…
We study the two-times differentiability of the value functions of the primal and dual optimization problems that appear in the setting of expected utility maximization in incomplete markets. We also study the differentiability of the…
This paper studies the properties of the optimal portfolio-consumption strategies in a {finite horizon} robust utility maximization framework with different borrowing and lending rates. In particular, we allow for constraints on both…
In this article we consider an optimization problem of expected utility maximization of continuous-time trading in a financial market. This trading is constrained by a benchmark for a utility-based shortfall risk measure. The market…
This paper investigates the problem of maximizing expected terminal utility in a (generically incomplete) discrete-time financial market model with finite time horizon. In contrast to the standard setting, a possibly non-concave utility…
Perpetual American options are financial instruments that can be readily exercised and do not mature. In this paper we study in detail the problem of pricing this kind of derivatives, for the most popular flavour, within a framework in…
It is well-known that the Black-Scholes formula has been derived under the assumption of constant volatility in stocks. In spite of evidence that this parameter is not constant, this formula is widely used by financial markets. This paper…
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…
A derivative is a financial security whose value is a function of underlying traded assets and market outcomes. Pricing a financial derivative involves setting up a market model, finding a martingale (``fair game") probability measure for…
This paper studies dynamic asset allocation with interest rate risk and several sources of ambiguity. The market consists of a risk-free asset, a zero-coupon bond (both determined by a Vasicek model), and a stock. There is ambiguity about…
The problem of determining the European-style option price in the incomplete market has been examined within the framework of stochastic optimization. An analytic method based on the discrete dynamic programming equation (Bellman equation)…
A corporate bond trader in a typical sell side institution such as a bank provides liquidity to the market participants by buying/selling securities and maintaining an inventory. Upon receiving a request for a buy/sell price quote (RFQ),…
We investigate an optimal investment problem with a general performance criterion which, in particular, includes discontinuous functions. Prices are modeled as diffusions and the market is incomplete. We find an explicit solution for the…
In this work, we expand the idea of Samuelson[3] and Shepp[2,5,6] for stock optimization using the Bachelier model [4] as our models for the stock price at the money (X[stock price]= K[strike price]) for the American call and put options…
I study the limit of a large random economy, where a set of consumers invests in financial instruments engineered by banks, in order to optimize their future consumption. This exercise shows that, even in the ideal case of perfect…