Related papers: A Mispricing Model of Stocks Under Asymmetric Info…
For a commodity spot price dynamics given by an Ornstein-Uhlenbeck process with Barndorff-Nielsen and Shephard stochastic volatility, we price forwards using a class of pricing measures that simultaneously allow for change of level and…
We conduct a preliminary analysis of a pairs trading strategy using the Ornstein-Uhlenbeck (OU) process to model stock price spreads. We compare this approach to a naive pairs trading strategy that uses a rolling window to calculate mean…
We present a Monte Carlo approach to pairs trading on mean-reverting spreads modeled by L\'evy-driven Ornstein-Uhlenbeck processes. Specifically, we focus on using a variance gamma driving process, an infinite activity pure jump process to…
By employing the technique of enlargement of filtrations, we demonstrate how to incorporate information about the future trend of the stochastic interest rate process into a financial model. By modeling the interest rate as an affine…
We consider a discrete-time version of the popular optimal dividend pay-out problem in risk theory. The novel aspect of our approach is that we allow for a risk averse insurer, i.e., instead of maximising the expected discounted dividends…
We address the fundamental limits of learning unknown parameters of any stochastic process from time-series data, and discover exact closed-form expressions for how optimal inference scales with observation length. Given a parametrized…
This paper focuses on parameter estimation and introduces a new method for lower bounding the Bayesian risk. The method allows for the use of virtually \emph{any} information measure, including R\'enyi's $\alpha$, $\varphi$-Divergences, and…
This paper studies a Kyle-Back model with a risk-averse insider possessing exponential utility and a dynamic stochastic signal about the asset's terminal fundamental value. While the existing literature considers either risk-neutral…
We study several optimal stopping problems that arise from trading a mean-reverting price spread over a finite horizon. Modeling the spread by the Ornstein-Uhlenbeck process, we analyze three different trading strategies: (i) the long-short…
Modelling bounded rational decision-making through information constrained processing provides a principled approach for representing departures from rationality within a reinforcement learning framework, while still treating…
We consider the mean-variance hedging problem under partial information in the case where the flow of observable events does not contain the full information on the underlying asset price process. We introduce a martingale equation of a new…
In an arbitrage-free simple market, we demonstrate that for a class of state-dependent exponential utilities, there exists a unique prediction of the random risk aversion that ensures the consistency of optimal strategies across any time…
We are concerned with optimal control strategies subject to uncertain demands. An Ornstein-Uhlenbeck process describes the uncertain demand. The transport within the supply system is modeled by the linear advection equation. We consider…
We study optimal investment problem for a diffusion market consisting of a finite number of risky assets (for example, bonds, stocks and options). Risky assets evolution is described by Ito's equation, and the number of risky assets can be…
We consider a continuous-time linear-quadratic Gaussian control problem with partial observations and costly information acquisition. More precisely, we assume the drift of the state process to be governed by an unobservable…
The article poses a general model for optimal control subject to information constraints, motivated in part by recent work of Sims and others on information-constrained decision-making by economic agents. In the average-cost optimal control…
This paper formulates an utility indifference pricing model for investors trading in a discrete time financial market under non-dominated model uncertainty. The investors preferences are described by strictly increasing concave random…
We model continuous-time information flows generated by a number of information sources that switch on and off at random times. By modulating a multi-dimensional L\'evy random bridge over a random point field, our framework relates the…
The paper summarizes key results of the benchmark approach with a focus on the concept of benchmark-neutral pricing. It applies these results to the pricing of an extreme-maturity European put option on a well-diversified stock index. The…
In this paper we examine inefficiencies and information disparity in the Japanese stock market. By carefully analysing information publicly available on the internet, an `outsider' to conventional statistical arbitrage strategies--which are…