Related papers: Pricing for Large Positions in Contingent Claims
We consider a discrete time financial market with proportional transaction costs under model uncertainty, and study a num\'eraire-based semi-static utility maximization problem with an exponential utility preference. The randomization…
We present a general approach to the pricing of products in finance and insurance in the multi-period setting. It is a combination of the utility indifference pricing and optimal intertemporal risk allocation. We give a characterization of…
We present an approach for pricing European call options in presence of proportional transaction costs, when the stock price follows a general exponential L\'{e}vy process. The model is a generalization of the celebrated work of Davis,…
We investigate a pricing rule that is applicable for streams of income or contingent claim liabilities and study how this rule changes under additional insider-type information that an investor might obtain. Considering a model where the…
We study the hedging and valuation of European and American claims on a non-traded asset $Y$, when a traded stock $S$ is available for hedging, with $S$ and $Y$ following correlated geometric Brownian motions. This is an incomplete market,…
We discuss utility based pricing and hedging of jump diffusion processes with emphasis on the practical applicability of the framework. We point out two difficulties that seem to limit this applicability, namely drift dependence and…
We consider a discrete-time robust utility maximisation with semistatic strategies, and the associated indifference prices of exotic options. For this purpose, we introduce a robust form of convex integral functionals on the space of…
We study the sensitivity of the expected utility maximization problem in a continuous semi-martingale market with respect to small changes in the market price of risk. Assuming that the preferences of a rational economic agent are modeled…
The paper introduces benchmark-neutral pricing and hedging for long-term contingent claims. It employs the growth optimal portfolio of the stocks as numeraire and the new benchmark-neutral pricing measure for pricing. For a realistic…
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…
We explore a decomposition in which returns on a large class of portfolios relative to the market depend on a smooth non-negative drift and changes in the asset price distribution. This decomposition is obtained using general continuous…
In this paper, we consider a financial market with assets exposed to some risks inducing jumps in the asset prices, and which can still be traded after default times. We use a default-intensity modeling approach, and address in this…
We study super-replication of contingent claims in an illiquid market with model uncertainty. Illiquidity is captured by nonlinear transaction costs in discrete time and model uncertainty arises as our only assumption on stock price returns…
It is well known that the minimal superhedging price of a contingent claim is too high for practical use. In a continuous-time model uncertainty framework, we consider a relaxed hedging criterion based on acceptable shortfall risks.…
Load-serving entities which procure electricity from the wholesale electricity market to service end-users face significant quantity and price risks due to the volatile nature of electricity demand and quasi-fixed residential tariffs at…
In an electric power system, demand fluctuations may result in significant ancillary cost to suppliers. Furthermore, in the near future, deep penetration of volatile renewable electricity generation is expected to exacerbate the variability…
We propose a model for an insurance loss index and the claims process of a single insurance company holding a fraction of the total number of contracts that captures both ordinary losses and losses due to catastrophes. In this model we…
This paper presents a synthesis of the theories of portfolio generating functions and option pricing. The theory of portfolio generation is extended to measure the value of portfolios generated by positive C^{2,1} functions of asset prices…
We study a large economy in which firms cannot compute exact solutions to the non-linear equations that characterize the equilibrium price at which they can sell future output. Instead, firms use polynomial expansions to approximate prices.…
We consider the problem of utility maximization for small traders on incomplete financial markets. As opposed to most of the papers dealing with this subject, the investors' trading strategies we allow underly constraints described by…