Related papers: Utility based pricing and hedging of jump diffusio…
We consider the optimal investment and marginal utility pricing problem of a risk averse agent and quantify their exposure to a small amount of model uncertainty. Specifically, we compute explicitly the first-order sensitivity of their…
We study the problem of optimal pricing and hedging of a European option written on an illiquid asset $Z$ using a set of proxies: a liquid asset $S$, and $N$ liquid European options $P_i$, each written on a liquid asset $Y_i, i=1,N$. We…
In this paper, we investigate risk minimization problem of derivatives based on non-tradable underlyings by means of dynamic g-expectations which are slight different from conditional g-expectations. In this framework, inspired by [1] and…
We study the pricing and hedging of derivative securities with uncertainty about the volatility of the underlying asset. Rather than taking all models from a prespecified class equally seriously, we penalise less plausible ones based on…
We consider a class of diffusions controlled through the drift and jump size, and driven by a jump L\'evy process and a nondegenerate Wiener process, and we study infinite horizon (ergodic) risk-sensitive control problem for this model. We…
In this paper we discuss the optimal liquidation over a finite time horizon until the exit time. The drift and diffusion terms of the asset price are general functions depending on all variables including control and market regime. There is…
We consider robust pricing and hedging for options written on multiple assets given market option prices for the individual assets. The resulting problem is called the multi-marginal martingale optimal transport problem. We propose two…
A discretization scheme for nonnegative diffusion processes is proposed and the convergence of the corresponding sequence of approximate processes is proved using the martingale problem framework. Motivations for this scheme come typically…
We expose a theoretical hedging optimization framework with variational preferences under convex risk measures. We explore a general dual representation for the composition between risk measures and utilities. We study the properties of the…
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 the general framework of a semimartingale financial model and a utility function $U$ defined on the positive real line, we compute the first-order expansion of marginal utility-based prices with respect to a ``small'' number of random…
A new jump diffusion regime-switching model is introduced, which allows for linking jumps in asset prices with regime changes. We prove the existence and uniqueness of the solution to the risk-sensitive asset management criterion…
We consider a refracted jump diffusion process having two-sided jumps with rational Laplace transforms. For such a process, by applying a straightforward but interesting approach, we derive formulas for the Laplace transform of its…
This paper studies regularity property of the value function for an infinite-horizon discounted cost impulse control problem, where the underlying controlled process is a multidimensional jump diffusion with possibly `infinite-activity'…
We consider indifference pricing of contingent claims consisting of payment flows in a discrete time model with proportional transaction costs and under exponential disutility. This setting covers utility maximisation as a special case. A…
The utility-based pricing of defaultable bonds in the case of stochastic intensity models of default risk is discussed. The Hamilton-Jacobi- Bellman (HJB) equations for the value functions is derived. A finite difference method is used to…
We consider the classical problem of maximizing the expected utility of terminal net wealth with a final random liability in a simple jump-diffusion model. In the spirit of Horst et al. (2014) and Santacroce-Trivellato (2014), under…
Jump diffusion processes are widely used to model asset prices over time, mainly for their ability to capture complex discontinuous behavior, but inference on the model parameters remains a challenge. Here our goal is posterior inference on…
This paper addresses the nonparametric estimation of the drift function over a compact domain for a time-homogeneous diffusion process, based on high-frequency discrete observations from $N$ independent trajectories. We propose a neural…
We consider a general local-stochastic volatility model and an investor with exponential utility. For a European-style contingent claim, whose payoff may depend on either a traded or non-traded asset, we derive an explicit approximation for…