Related papers: Utility based pricing and hedging of jump diffusio…
We study option prices in financial markets where the risky asset prices are modelled by jump diffusions. It was proposed by Schweizer (1996) in a general semimartingale setting, following earlier works by F\"ollmer and Sondermann (1986)…
We present a general approach to the pricing of products in finance and insurance in the multi-period setting. It is a combination of the utility indifference pricing and optimal intertemporal risk allocation. We give a characterization of…
In this article, a compact finite difference method is proposed for pricing European and American options under jump-diffusion models. Partial integro-differential equation and linear complementary problem governing European and American…
In this paper, we consider the robust adaptive non parametric estimation problem for the drift coefficient in diffusion processes. An adaptive model selection procedure, based on the improved weighted least square estimates, is proposed.…
We determine the variance-optimal hedge when the logarithm of the underlying price follows a process with stationary independent increments in discrete or continuous time. Although the general solution to this problem is known as backward…
This paper develops a method to derive optimal portfolios and risk premia explicitly in a general diffusion model for an investor with power utility and a long horizon. The market has several risky assets and is potentially incomplete.…
In this article, we consider a jump diffusion process (X_t)observed at discrete times t=0,Delta,...,nDelta. The sampling interval Delta tends to 0 and nDelta tends to infinity. We assume that (X_t) is ergodic, strictly stationary and…
We study investment and insurance demand decisions for an agent in a theoretical continuous-time expected utility maximization model that combines risky assets with an (exogenous) insurable background risk. This risk takes the form of a…
This paper investigates the robustness of stochastic optimal control for controlled regime switching diffusions. We consider systems driven by both continuous fluctuations and discrete regime changes, allowing for model misspecification in…
The maximum likelihood approach is adapted to the problem of estimation of drift and diffusion functions of stochastic processes from measured time series. We reconcile a previously devised iterative procedure [Kleinhans et al., Physics…
In this work we consider the exponential utility maximization problem in the framework of semistatic hedging.
We study the optimal financing and dividend distribution problem with restricted dividend rates in a diffusion type surplus model where the drift and volatility coefficients are general functions of the level of surplus and the external…
We consider the Bachelier model with linear price impact. Exponential utility indifference prices are studied for vanilla European options and we compute their non-trivial scaling limit for a vanishing price impact which is inversely…
In this paper, we are presenting a method for estimation of market parameters modeled by jump diffusion process. The method proposed is based on Gibbs sampler, while the market parameters are the drift, the volatility, the jump intensity…
We introduce Dirac processes, using Dirac delta functions, for short-rate-type pricing of financial derivatives. Dirac processes add spikes to the existing building blocks of diffusions and jumps. Dirac processes are Generalized Processes,…
We study the problem of pricing variable annuities with a multi-layer expense strategy, under which the insurer charges fees from the policyholder's account only when the account value lies in some pre-specified disjoint intervals, where on…
It is well documented that a model for the underlying asset price process that seeks to capture the behaviour of the market prices of vanilla options needs to exhibit both diffusion and jump features. In this paper we assume that the asset…
This work takes up the challenges of utility maximization problem when the market is indivisible and the transaction costs are included. First there is a so-called solvency region given by the minimum margin requirement in the problem…
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…
Asymptotic theory for approximate martingale estimating functions is generalised to diffusions with finite-activity jumps, when the sampling frequency and terminal sampling time go to infinity. Rate optimality and efficiency are of…