Related papers: Static replications with traffic light options
We compare optimal static and dynamic solutions in trade execution. An optimal trade execution problem is considered where a trader is looking at a short-term price predictive signal while trading. When the trader creates an instantaneous…
We study the problem of option replication under constant proportional transaction costs in models where stochastic volatility and jumps are combined to capture the market's important features. Assuming some mild condition on the jump size…
It is well known that the minimal superhedging price of a contingent claim is too high for practical use. In a continuous-time model uncertainty framework, we consider a relaxed hedging criterion based on acceptable shortfall risks.…
We consider a general path-dependent version of the hedging problem with price impact of Bouchard et al. (2019), in which a dual formulation for the super-hedging price is obtained by means of PDE arguments, in a Markovian setting and under…
American options are studied in a general discrete market in the presence of proportional transaction costs, modelled as bid-ask spreads. Pricing algorithms and constructions of hedging strategies, stopping times and martingale…
We study a network formation game where nodes wish to send traffic to other nodes. Nodes can contract bilaterally other nodes to form bidirectional links as well as nodes can break unilaterally contracts to eliminate the corresponding…
In the present paper, we introduce a numerical scheme for the price of a barrier option when the price of the underlying follows a diffusion process. The numerical scheme is based on an extension of a static hedging formula of barrier…
It is shown that delta hedging provides the optimal trading strategy in terms of minimal required initial capital to replicate a given terminal payoff in a continuous-time Markovian context. This holds true in market models where no…
We propose a Fundamental Theorem of Asset Pricing and a Super-Replication Theorem in a model-independent framework. We prove these theorems in the setting of finite, discrete time and a market consisting of a risky asset S as well as…
We consider a hypergraph (I,C), with possible multiple (hyper)edges and loops, in which the vertices $i\in I$ are interpreted as agents, and the edges $c\in C$ as contracts that can be concluded between agents. The preferences of each agent…
We propose a constructive framework for the super-hedging problem of a European contingent claim under proportional transaction costs in discrete time. Our main contribution is an explicit recursive scheme that computes both the…
Starting from a heuristic learning scheme for N-person games, we derive a new class of continuous-time learning dynamics consisting of a replicator-like drift adjusted by a penalty term that renders the boundary of the game's strategy space…
In this paper, to cope with the shortage of sufficient theoretical support resulted from the fast-growing quantitative financial modeling, we investigate two classes of generalized stochastic volatility models, establish their…
In this article we show that the payment flow of a linear tax on trading gains from a security with a semimartingale price process can be constructed for all c\`agl\`ad and adapted trading strategies. It is characterized as the unique…
In this note, we consider European options of type $h(X^1_T, X^2_T,\ldots, X^n_T)$ depending on several underlying assets. We give a multidimensional version of the result of Breeden and Litzenberger \cite{Breeden} on the relation between…
We investigate a statistical-static hedging technique for pricing assets considered as single-step stochastic cash flows. The valuation is based on constructing in a canonical way a European style derivative on a benchmark security such…
We prove a scaling limit theorem for the super-replication cost of options in a Cox--Ross--Rubinstein binomial model with transient price impact. The correct scaling turns out to keep the market depth parameter constant while resilience…
In this paper we introduce a new approach to model-free path-dependent option pricing. We first introduce a general duality result for linear optimisation problems over signed measures introduced in [3] and show how the the problem of…
We study indifference pricing of exotic derivatives by using hedging strategies that take static positions in quoted derivatives but trade the underlying and cash dynamically over time. We use real quotes that come with bid-ask spreads and…
In this paper we analyse financial implications of exchangeability and similar properties of finite dimensional random vectors. We show how these properties are reflected in prices of some basket options in view of the well-known put-call…