Related papers: A Mispricing Model of Stocks Under Asymmetric Info…
We study a continuous time economy where agents have asymmetric information. The informed agent (``$I$''), at time zero, receives a private signal about the risky assets' terminal payoff $\Psi(X_T)$, while the uninformed agent (``$U$'') has…
This paper investigates a robust optimal consumption, investment, and reinsurance problem for an insurer with Epstein-Zin recursive preferences operating under model uncertainty. The insurer's surplus follows the diffusion approximation of…
Machine learning is central to empirical asset pricing, but portfolio construction still relies on point predictions and largely ignores asset-specific estimation uncertainty. We propose a simple change: sort assets using…
In this paper we study the valuation problem of an insurance company by maximizing the expected discounted future dividend payments in a model with partial information that allows for a changing economic environment. The surplus process is…
We study the hedging and valuation of European and American claims on a non-traded asset $Y$, when a traded stock $S$ is available for hedging, with $S$ and $Y$ following correlated geometric Brownian motions. This is an incomplete market,…
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…
In this work we propose a statistical approach to handling sources of theoretical uncertainty in string theory models of inflation. By viewing a model of inflation as a probabilistic graph, we show that there is an inevitable information…
This paper investigates well posedness of utility maximization problems for financial markets where stock returns depend on a hidden Gaussian mean reverting drift process. Since that process is potentially unbounded, well posedness cannot…
In a paper published in The Economic Journal in 2000, Weisbuch et al.\ introduce a model for buyers' preferences to the various sellers in over-the-counter (OTC) fish markets. While this model has become an archetype of economic…
In this paper, we propose a minimal model beyond geometric Brownian motion that aims to describe price actions with market inefficiency. From simple financial theory considerations, we arrive at a simple two-variable hidden Markovian time…
We study a reinsurer who faces multiple sources of model uncertainty. The reinsurer offers contracts to $n$ insurers whose claims follow compound Poisson processes representing both idiosyncratic and systemic sources of loss. As the…
We study the consistency of sample mean-variance portfolios of arbitrarily high dimension that are based on Bayesian or shrinkage estimation of the input parameters as well as weighted sampling. In an asymptotic setting where the number of…
We study an optimal portfolio problem designed for an agent operating in intraday electricity markets. The investor is allowed to trade in a single risky asset modelling the continuously traded power and aims to maximize the expected…
Predicting trends in stock market prices has been an area of interest for researchers for many years due to its complex and dynamic nature. Intrinsic volatility in stock market across the globe makes the task of prediction challenging.…
Motivated by the industry practice of pairs trading, we study the optimal timing strategies for trading a mean-reverting price spread. An optimal double stopping problem is formulated to analyze the timing to start and subsequently…
Standard models of asset price dynamics, such as geometric Brownian motion (see, for example, Osborne, 1959, Samuelson, 2016), do not formally incorporate investor inertia. This paper presents a two-stage framework for modelling this…
We study the anticipating version of the classical portfolio optimization problem in a financial market with the presence of a trader who possesses privileged information about the future (insider information), but who is also subjected to…
We find the variance-optimal equivalent martingale measure when multivariate assets are modeled by a regime-switching geometric Brownian motion, and the regimes are represented by a homogeneous continuous time Markov chain. Under this new…
We show that when a Brownian bridge is physically constrained to satisfy a canonical condition, its time evolution exactly coincides with an m-geodesic on the statistical manifold of Gaussian distributions. This identification provides a…
We develop a stochastic equilibrium model for an electricity market with asymmetric renewable energy forecasts. In our setting, market participants optimize their profits using public information about a conditional expectation of energy…