Related papers: Coherent Price Systems and Uncertainty-Neutral Val…
Quantum computers have the potential to provide an advantage for financial pricing problems by the use of quantum estimation. In a broader context, it is reasonable to ask about situations where the market and the assets traded on the…
This paper considers utility indifference valuation of derivatives under model uncertainty and trading constraints, where the utility is formulated as an additive stochastic differential utility of both intertemporal consumption and…
Prediction markets are often described as mechanisms that ``aggregate information'' into prices, yet the mapping from dispersed private information to observed market histories is typically noisy, endogenous, and shaped by heterogeneous and…
We consider the randomness of market trade as the origin of price and return stochasticity. We look at time series of trade values and volumes as random variables during the averaging interval {\Delta} and describe the dependences of…
In a semimartingale financial market model, it is shown that there is equivalence between absence of arbitrage of the first kind (a weak viability condition) and the existence of a strictly positive process that acts as a local martingale…
We introduce and discuss a general criterion for the derivative pricing in the general situation of incomplete markets, we refer to it as the No Almost Sure Arbitrage Principle. This approach is based on the theory of optimal strategy in…
We introduce, in continuous time, an axiomatic approach to assign to any financial position a dynamic ask (resp. bid) price process. Taking into account both transaction costs and liquidity risk this leads to the convexity (resp. concavity)…
While absence of arbitrage in frictionless financial markets requires price processes to be semimartingales, non-semimartingales can be used to model prices in an arbitrage-free way, if proportional transaction costs are taken into account.…
We derive tractable necessary and sufficient conditions for the absence of buy-and-hold arbitrage opportunities in a perfectly liquid, one period market. We formulate the positivity of Arrow-Debreu prices as a generalized moment problem to…
Constant and symmetric price impact functions, most commonly used in agent-based market modelling, are shown to give rise to paradoxical and inconsistent outcomes in the simplest case of arbitrage exploitation when open-hold-close actions…
In this paper, a new approach for solving the problems of pricing and hedging derivatives is introduced in a general frictionless market setting. The method is applicable even in cases where an equivalent local martingale measure fails to…
The adaptation to situations of sequential choice under uncertainty of decision criteria which deviate from (subjective) expected utility raises the problem of ensuring the selection of a nondominated strategy. In particular, when following…
We prove the superhedging duality for a discrete-time financial market with proportional transaction costs under model uncertainty. Frictions are modeled through solvency cones as in the original model of [Kabanov, Y., Hedging and…
Let $S^F$ be a $\mathbb{P}$-martingale representing the price of a primitive asset in an incomplete market framework. We present easily verifiable conditions on model coefficients which guarantee the completeness of the market in which in…
G-expectation, as a sublinear expectation, provides a powerful framework for modeling uncertainty in financial markets. Motivated by the need for robust valuation under model uncertainty, this work develops a unified risk-neutral valuation…
The purpose of this work is to explore the role that arbitrage opportunities play in pricing financial derivatives. We use a non-equilibrium model to set up a stochastic portfolio, and for the random arbitrage return, we choose a stationary…
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…
A public decision-making problem consists of a set of issues, each with multiple possible alternatives, and a set of competing agents, each with a preferred alternative for each issue. We study adaptations of market economies to this…
We introduce uncertainty into a pure exchange economy and establish a connection between Shannon's differential entropy and uniqueness of price equilibria. The following conjecture is proposed under the assumption of a uniform probability…
Under short sales prohibitions, no free lunch with vanishing risk (NFLVR-S) is known to be equivalent to the existence of an equivalent supermartingale measure for the price processes (Pulido [22]). For two given price processes, we…