Related papers: Utility based pricing and hedging of jump diffusio…
We study the behavior of the critical price of an American put option near maturity in the Jump diffusion model when the underlying stock pays dividends at a continuous rate and the limit of the critical price is smaller than the stock…
In this paper we propose a novel pricing-hedging framework for volatility derivatives which simultaneously takes into account rough volatility and volatility jumps. Our model directly targets the instantaneous variance of a risky asset and…
We address the variational formulation of the risk-sensitive reward problem for non-degenerate diffusions on $\mathbb{R}^d$ controlled through the drift. We establish a variational formula on the whole space and also show that the…
The problem of eliminating fast-relaxing variables to obtain an effective drift-diffusion process in position is solved in a uniform and straightforward way for models with velocity a function jointly of position and fast variables. A more…
We study utility indifference prices and optimal purchasing quantities for a non-traded contingent claim in an incomplete semi-martingale market with vanishing hedging errors. We make connections with the theory of large deviations. We…
In this paper we study the pricing and hedging problem of a portfolio of life insurance products under the benchmark approach, where the reference market is modelled as driven by a state variable following a polynomial diffusion on a…
We consider the setting in which an electric power utility seeks to curtail its peak electricity demand by offering a fixed group of customers a uniform price for reductions in consumption relative to their predetermined baselines. The…
In this paper, we consider scaling limits of exponential utility indifference prices for European contingent claims in the Bachelier model. We show that the scaling limit can be represented in terms of the \emph{specific relative entropy},…
Most energy and commodity markets exhibit mean-reversion and occasional distinctive price spikes, which results in demand for derivative products which protect the holder against high prices. To this end, in this paper we present exact and…
This paper studies the pricing and hedging of derivatives in frictionless and competitive, but incomplete jump-diffusion markets. A unique equivalent martingale measure (EMM) is obtained using filtration reduction to a fictitious complete…
In the present work, we explore homogenization techniques for a class of switching diffusion processes whose drift and diffusion coefficients, and jump intensities are smooth, spatially periodic functions; we assume full coupling between…
We perform a stability analysis for the utility maximization problem in a general semimartingale model where both liquid and illiquid assets (random endowments) are present. Small misspecifications of preferences (as modeled via expected…
Mandatory emission trading schemes are being established around the world. Participants of such market schemes are always exposed to risks. This leads to the creation of an accompanying market for emission-linked derivatives. To evaluate…
In this paper, we consider a one-dimensional diffusion process with jumps driven by a Hawkes process. We are interested in the estimations of the volatility function and of the jump function from discrete high-frequency observations in a…
We consider the problem of statistical inference for the effective dynamics of multiscale diffusion processes with (at least) two widely separated characteristic time scales. More precisely, we seek to determine parameters in the effective…
We study a microscopic limit order book model, in which the order dynamics depend on the current best bid and ask price and the current volume density functions, simultaneously, and derive its macroscopic high-frequency dynamics. As opposed…
We prove maximum principles for the problem of optimal control for a jump diffusion with infinite horizon and partial information. The results are applied to partial information optimal consumption and portfolio problems in infinite…
We construct a sequence of functions that uniformly converge (on compact sets) to the price of Asian option, which is written on a stock whose dynamics follows a jump diffusion, exponentially fast. Each of the element in this sequence…
We present a general framework for the estimation of corporate default based on a firm's capital structure, when its assets are assumed to follow a pure jump L\'evy processes; this setup provides a natural extension to usual default metrics…
We consider as given a discrete time financial market with a risky asset and options written on that asset and determine both the sub- and super-hedging prices of an American option in the model independent framework of ArXiv:1305.6008. We…