Related papers: Coherent Price Systems and Uncertainty-Neutral Val…
We construct a statistical indicator for the detection of short-term asset price bubbles based on the information content of bid and ask market quotes for plain vanilla put and call options. Our construction makes use of the martingale…
We revisit the classical topic of quadratic and linear mean-variance equilibria with both financial and real assets. The novelty of our results is that they are the first allowing for equilibrium prices driven by general semimartingales and…
In a discrete-time financial market, a generalized duality is established for model-free superhedging, given marginal distributions of the underlying asset. Contrary to prior studies, we do not require contingent claims to be upper…
We model the dynamics of asset prices and associated derivatives by consideration of the dynamics of the conditional probability density process for the value of an asset at some specified time in the future. In the case where the price…
We establish some well-posedness and comparison results for BSDEs driven by one- and multi-dimensional martingales. On the one hand, our approach is largely motivated by results and methods developed in Carbone et al. (2008) and El Karoui…
A dynamical model is introduced for the formation of a bullish or bearish trends driving an asset price in a given market. Initially, each agent decides to buy or sell according to its personal opinion, which results from the combination of…
Non-equilibrium phenomena occur not only in physical world, but also in finance. In this work, stochastic relaxational dynamics (together with path integrals) is applied to option pricing theory. A recently proposed model (by Ilinski et…
We show that the results of ArXiv:1305.6008 on the Fundamental Theorem of Asset Pricing and the super-hedging theorem can be extended to the case in which the options available for static hedging (\emph{hedging options}) are quoted with…
We study the emergence of instabilities in a stylized model of a financial market, when different market actors calculate prices according to different (local) market measures. We derive typical properties for ensembles of large random…
We derive a general multivariate theory for realised characteristics of `model-free discretisation-invariant swaps', so-called because the standard no-arbitrage assumption of martingale forward prices is sufficient to derive fair-value swap…
We will compare three types of prices, namely, rational (hedging) prices, geometric (growth rate) prices, and martingale (measure) prices. We will show that rational prices in the complete market theory are sometimes contrary to common…
The ex-ante evaluation of policies using structural econometric models is based on estimated parameters as a stand-in for the true parameters. This practice ignores uncertainty in the counterfactual policy predictions of the model. We…
Economic and financial theories and practice essentially deal with uncertain future. Humans encounter uncertainty in different kinds of activity, from sensory-motor control to dynamics in financial markets, what has been subject of…
This paper does not suppose a priori that the evolution of the price of a financial asset is a semimartingale. Since possible strategies of investors are self-financing, previous prices are forced to be finite quadratic variation processes.…
We present an Hilbert space formulation for a set of implied volatility models introduced in \cite{BraceGoldys01} in which the authors studied conditions for a family of European call options, varying the maturing time and the strike price…
Without probability theory, we define classes of supermartingales, martingales, and semimartingales in idealized financial markets with continuous price paths. This allows us to establish probability-free versions of a number of standard…
The relationship between price volatilty and a market extremum is examined using a fundamental economics model of supply and demand. By examining randomness through a microeconomic setting, we obtain the implications of randomness in the…
A statistical generalization is made of microeconomics in the spirit of going from classical to statistical mechanics. The price and quantity of every commodity1 traded in the market, at each instant of time, is considered to be an…
We study contingent claims in a discrete-time market model where trading costs are given by convex functions and portfolios are constrained by convex sets. In addition to classical frictionless markets and markets with transaction costs or…
We consider implied volatilities in asset pricing models, where the discounted underlying is a strict local martingale under the pricing measure. Our main result gives an asymptotic expansion of the right wing of the implied volatility…