Related papers: Shadow price in the power utility case
This paper addresses the question of how much to bid to maximize the profit when trading in two electricity markets: the hourly Day-Ahead Auction and the quarter-hourly Intraday Auction. For optimal coordinated bidding many price scenarios…
In this paper we investigate a utility maximization problem with drift uncertainty in a multivariate continuous-time Black-Scholes type financial market which may be incomplete. We impose a constraint on the admissible strategies that…
In this paper we analyze a nonlinear Black--Scholes model for option pricing under variable transaction costs. The diffusion coefficient of the nonlinear parabolic equation for the price $V$ is assumed to be a function of the underlying…
Our paper aims to model and forecast the electricity price by taking a completely new perspective on the data. It will be the first approach which is able to combine the insights of market structure models with extensive and modern…
The sum-utility maximization problem is known to be important in the energy systems literature. The conventional assumption to address this problem is that the utility is concave. But for some key applications, such an assumption is not…
In this paper we study the pricing and hedging of structured products in energy markets, such as swing and virtual gas storage, using the exponential utility indifference pricing approach in a general incomplete multivariate market model…
We show how the prices of options can be determined with the help of double-fractional differential equation in such a way that their inclusion in a portfolio of stocks provides a more reliable hedge against dramatic price drops that the…
In this note, Black--Scholes implied volatility is expressed in terms of various optimisation problems. From these representations, upper and lower bounds are derived which hold uniformly across moneyness and call price. Various symmetries…
We consider an optimal trading problem over a finite period of time during which an investor has access to both a standard exchange and a dark pool. We take the exchange to be an order-driven market and propose a continuous-time setup for…
We consider the problem of exponential utility indifference valuation under the simplified framework where traded and nontraded assets are uncorrelated but where the claim to be priced possibly depends on both. Traded asset prices follow a…
In this paper we study utility maximization with proportional transaction costs. Assuming extended weak convergence of the underlying processes we prove the convergence of the corresponding utility maximization problems. Moreover, we…
Option contracts can be valued by using the Black-Scholes equation, a partial differential equation with initial conditions. An exact solution for European style options is known. The computation time and the error need to be minimized…
We study an optimal execution problem in the infinite horizon setup. Our financial market is given by the Black-Scholes model with a linear price impact. The main novelty of the current note is that we study the constrained case where the…
We consider fractional Black-Scholes market with proportional transaction costs. When transaction costs are present, one trades periodically i.e. we have the discrete trading with equidistance $n^{-1}$ between trading times. We derive a non…
This paper argues that we ought to conceive of the Dark Energy problem -- the question of how to account for observational data, naturally interpreted as accelerated expansion of the universe -- as a crisis of underdetermined…
The space of call price functions has a natural noncommutative semigroup structure with an involution. A basic example is the Black--Scholes call price surface, from which an interesting inequality for Black--Scholes implied volatility is…
We develop inference under model uncertainty due to weak, noisy, multiple candidate restrictions and theories, and nuisance control covariates. A unified framework is given with degrees of misspecification and corresponding shadow prices,…
This paper investigates the necessary optimality conditions for uniformly overtaking optimal control on infinite horizon in the free end case. %with free right endpoint. In the papers of S.M.Aseev, A.V.Kryazhimskii, V.M.Veliov, K.O.Besov…
We study the problem of maximising terminal utility for an agent facing model uncertainty, in a frictionless discrete-time market with one safe asset and finitely many risky assets. We show that an optimal investment strategy exists if the…
We consider an agent who has access to a financial market, including derivative contracts, who looks to maximise her utility. Whilst the agent looks to maximise utility over one probability measure, or class of probability measures, she…