Related papers: Time-Consistent and Market-Consistent Evaluations
We investigate a statistical-static hedging technique for pricing assets considered as single-step stochastic cash flows. The valuation is based on constructing in a canonical way a European style derivative on a benchmark security such…
We discuss the Bayesian emulation approach to computational solution of multi-step portfolio studies in financial time series. "Bayesian emulation for decisions" involves mapping the technical structure of a decision analysis problem to…
This paper studies a type of periodic utility maximization for portfolio management in an incomplete market model, where the underlying price diffusion process depends on some external stochastic factors. The portfolio performance is…
In a Markovian stochastic volatility model, we consider financial agents whose investment criteria are modelled by forward exponential performance processes. The problem of contingent claim indifference valuation is first addressed and a…
The statistical properties of a stochastic process may be described (1)by the expectation values of the observables, (2)by the probability distribution functions or (3)by probability measures on path space. Here an analysis of level (3) is…
Under proportional transaction costs, a price process is said to have a consistent price system, if there is a semimartingale with an equivalent martingale measure that evolves within the bid-ask spread. We show that a continuous,…
We present an approach to market-consistent multi-period valuation of insurance liability cash flows based on a two-stage valuation procedure. First, a portfolio of traded financial instrument aimed at replicating the liability cash flow is…
We develop an approach to time-consistent risk evaluation of continuous-time processes in Markov systems. Our analysis is based on dual representation of coherent risk measures, differentiability concepts for multivalued mappings, and a…
Market indicators such as CPI and GDP have been widely used over decades to identify the stage of business cycles and also investment attractiveness of sectors given market conditions. In this paper, we propose a two-stage methodology that…
This paper re-examines the problem of estimating risk premia in linear factor pricing models. Typically, the data used in the empirical literature are characterized by weakness of some pricing factors, strong cross-sectional dependence in…
Existence of stochastic financial equilibria giving rise to semimartingale asset prices is established under a general class of assumptions. These equilibria are expressed in real terms and span complete markets or markets with withdrawal…
In this paper, we examine the biases that arise when firms run A/B tests on continuous parameters to estimate global treatment effects on performance metrics of interest; we particularly focus on price experiments to measure the price…
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…
In a stochastic volatility framework, we find a general pricing equation for the class of payoffs depending on the terminal value of a market asset and its final quadratic variation. This allows a pricing tool for European-style claims…
We develop inference for a two-sided matching model where the characteristics of agents on one side of the market are endogenous due to pre-matching investments. The model can be used to measure the impact of frictions in labour markets…
The aim of this article is to provide a systematic analysis of the conditions such that Fourier transform valuation formulas are valid in a general framework; i.e. when the option has an arbitrary payoff function and depends on the path of…
The asset pricing literature emphasizes factor models that minimize pricing errors but overlooks unselected candidate factors that could enhance the performance of test assets. This paper proposes a framework for factor model selection and…
We develop a version of the fundamental theorem of asset pricing for discrete-time markets with proportional transaction costs and model uncertainty. A robust notion of no-arbitrage of the second kind is defined and shown to be equivalent…
We unify and establish equivalence between the pathwise and the quasi-sure approaches to robust modelling of financial markets in discrete time. In particular, we prove a Fundamental Theorem of Asset Pricing and a Superhedging Theorem,…
In this work, inspired by the Archer-Mouy-Selmi approach, we present two methodologies for scoring the stress test scenarios used by CCPs for sizing their Default Funds. These methodologies can be used by risk managers to compare different…