Related papers: Ito calculus without probability in idealized fina…
Expanding the ideas of the author's paper 'Nonexpansive maps and option pricing theory' (Kibernetica 34:6 (1998), 713-724) we develop a pure game-theoretic approach to option pricing, by-passing stochastic modeling. Risk neutral…
The continuous-time random walk (CTRW) is a pure-jump stochastic process with several applications in physics, but also in insurance, finance and economics. A definition is given for a class of stochastic integrals driven by a CTRW, that…
This paper initiates a study into the century-old issue of market predictability from the perspective of computational complexity. We develop a simple agent-based model for a stock market where the agents are traders equipped with simple…
In this note we consider the maximization of the expected terminal wealth for the setup of quadratic transaction costs. First, we provide a very simple probabilistic solution to the problem. Although the problem was largely studied, as far…
This paper deals with applications of coherent risk measures to pricing in incomplete markets. Namely, we study the No Good Deals pricing technique based on coherent risk. Two forms of this technique are presented: one defines a good deal…
The paper develops a calculus for a class of real-valued functions having a quadratic variation. The main result is a solution of the representation problem for a class of evolutions having a quadratic variation. The result is applied to…
Financial derivative pricing is a significant challenge in finance, involving the valuation of instruments like options based on underlying assets. While some cases have simple solutions, many require complex classical computational methods…
This thesis develops a new framework for modelling price processes in finance, such as an equity price or foreign exchange rate. This can be related to the conventional Ito calculus-based framework through the time integral of a price's…
For every adapted, c\`agl\`ad process (strategy) $G$ and typical c\`adl\`ag price paths whose jumps satisfy some mild growth condition we define integral $G\cdot S$ as a limit of simple integrals.
Given the univariate marginals of a real-valued, continuous-time martingale, (respectively, a family of measures parameterised by $t \in [0,T]$ which is increasing in convex order, or a double continuum of call prices) we construct a family…
We estimate prices of exotic options in a discrete-time model-free setting when the trader has access to market prices of a rich enough class of exotic and vanilla options. This is achieved by estimating an unobservable quantity called…
Value adjustment of uncollateralized trades is determined within a risk-neutral pricing framework. When hedging such trades, investors cannot freely trade protection on their own name, thus facing an incomplete market. This fact is…
We consider a financial market in which traders potentially face restrictions in trading some of the available securities. Traders are heterogeneous with respect to their beliefs and risk profiles, and the market is assumed thin: traders…
We provide a natural learning process in which a financial trader without a risk receives a gain in case when Stock Market is inefficient. In this process, the trader rationally choose his gambles using a prediction made by a randomized…
In this paper we describe three different variations of prime ideals: strongly irreducible ideals, strongly prime ideals and insulated prime ideals in the context of Leavitt path algebras. We give necessary and sufficient conditions under…
The concept of scaled quadratic variation was originally introduced by E. Gladyshev in 1961 in the context of Gaussian processes, where it was defined as the limit of the covariance of the underlying Gaussian process. In this paper, we…
We study a pathwise integral with respect to paths of finite quadratic variation, defined as the limit of non-anticipative Riemann sums for gradient-type integrands. We show that the integral satisfies a pathwise isometry property,…
We use a continuous version of the standard deviation premium principle for pricing in incomplete equity markets by assuming that the investor issuing an unhedgeable derivative security requires compensation for this risk in the form of a…
We study the range of prices at which a rational agent should contemplate transacting a financial contract outside a given securities market. Trading is subject to nonproportional transaction costs and portfolio constraints and full…
The Black-Scholes formula for pricing options on stocks and other securities has been generalized by Merton and Garman to the case when stock volatility is stochastic. The derivation of the price of a security derivative with stochastic…