Related papers: A Multidimensional Exponential Utility Indifferenc…
We consider a structural default model in an interconnected banking network as in Lipton [International Journal of Theoretical and Applied Finance, 19(6), 2016], with mutual obligations between each pair of banks. We analyse the model…
Recently, the volatility associated with marginal prices has increased due to large scale integration of renewable generation. Price volatility is undesirable from a consumer perspective. To address this issue, we present a framework for…
This paper derives a novel representation of the exponential discounting model that allows one to assess departures from the model via a measure of efficiency. The approach uses a revealed preference methodology that does not make any…
For incomplete preference relations that are represented by multiple priors and/or multiple -- possibly multivariate -- utility functions, we define a certainty equivalent as well as the utility buy and sell prices and indifference price…
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…
The aim of this short note is to present a solution to the discrete time exponential utility maximization problem in a case where the underlying asset has a multivariate normal distribution. In addition to the usual setting considered in…
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 pricing of derivative securities in financial markets modeled by a sub-mixed fractional Brownian motion with jumps (smfBm-J), a non-Markovian process that captures both long-range dependence and jump discontinuities. Under this…
This paper studies the problem of maximizing expected utility from terminal wealth in a semi-static market composed of derivative securities, which we assume can be traded only at time zero, and of stocks, which can be traded continuously…
Equity premium, the surplus returns of stocks over bonds, has been an enduring puzzle. While numerous prior works approach the problem assuming the utility of money is invariant across contexts, our approach implies that in efficient…
We study risk-sharing economies where heterogenous agents trade subject to quadratic transaction costs. The corresponding equilibrium asset prices and trading strategies are characterised by a system of nonlinear, fully-coupled…
We consider the optimal investment problem when the traded asset may default, causing a jump in its price. For an investor with constant absolute risk aversion, we compute indifference prices for defaultable bonds, as well as a price for…
We study the dynamic indifference pricing with ambiguity preferences. For this, we introduce the dynamic expected utility with ambiguity via the nonlinear expectation--G-expectation, introduced by Peng (2007). We also study the risk…
This paper introduces a novel approach to addressing uncertainty and associated risks in power system management, focusing on the discrepancies between forecasted and actual values of load demand and renewable power generation. By employing…
This paper proposes a risk-averse approach to energy storage price arbitrage, leveraging conformal uncertainty quantification for electricity price predictions. The method addresses the significant challenges posed by the inherent…
In this article, we look at the effect of volatility clustering on the risk indifference price of options described by Sircar and Sturm in their paper (Sircar, R., & Sturm, S. (2012). From smile asymptotics to market risk measures.…
We study a financial model with a non-trivial price impact effect. In this model we consider the interaction of a large investor trading in an illiquid security, and a market maker who is quoting prices for this security. We assume that the…
We propose a tractable semiparametric estimation method for structural dynamic discrete choice models. The distribution of additive utility shocks in the proposed framework is modeled by location-scale mixtures of extreme value…
We consider a discrete-time model of a financial market where a risky asset is bought and sold with transactions having a transient price impact. It is shown that the corresponding utility maximization problem admits a solution. We manage…
The use of non-translation invariant risk measures within the equal risk pricing (ERP) methodology for the valuation of financial derivatives is investigated. The ability to move beyond the class of convex risk measures considered in…