Related papers: Negative Call Prices
A derivative is a financial security whose value is a function of underlying traded assets and market outcomes. Pricing a financial derivative involves setting up a market model, finding a martingale (``fair game") probability measure for…
We demonstrate that minority mechanisms arise in the dynamics of markets because of effects of price impact; accordingly the relative importance of minority and delayed majority mechanisms depends on the frequency of trading. We then use…
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…
This paper completes the two studies undertaken in \cite{aksamit/choulli/deng/jeanblanc2} and \cite{aksamit/choulli/deng/jeanblanc3}, where the authors quantify the impact of a random time on the No-Unbounded-Risk-with-Bounded-Profit…
In this note, we develop stock option price approximations for a model which takes both the risk o default and the stochastic volatility into account. We also let the intensity of defaults be influenced by the volatility. We show that it…
We obtain option pricing formulas for stock price models in which the drift and volatility terms are functionals of a continuous history of the stock prices. That is, the stock dynamics follows a nonlinear stochastic functional differential…
We construct models for the pricing and risk management of inflation-linked derivatives. The models are rational in the sense that linear payoffs written on the consumer price index have prices that are rational functions of the state…
We solve the problem of super-hedging European or Asian options for discrete-time financial market models where executable prices are uncertain. The risky asset prices are not described by single-valued processes but measurable selections…
We show that in a financial market given by semimartingales an arbitrage opportunity, provided it exists, can only be exploited through short selling. This finding provides a theoretical basis for differences in regulation for financial…
We explore the striking mathematical connections that exist between market scoring rules, cost function based prediction markets, and no-regret learning. We show that any cost function based prediction market can be interpreted as an…
We generalize classical results on the existence of optimal portfolios in discrete time frictionless market models to models with capital gains taxes. We consider the realistic but mathematically challenging rule that losses do not trigger…
If prices of assets traded in a financial market are determined by non-linear pricing rules, different versions of the Call-Put Parity have been considered. We show that, under monotonicity, parities between call and put options and…
The numeraire portfolio in a financial market is the unique positive wealth process that makes all other nonnegative wealth processes, when deflated by it, supermartingales. The numeraire portfolio depends on market characteristics, which…
Market impact is the link between the volume of a (large) order and the price move during and after the execution of this order. We show that under no-arbitrage assumption, the market impact function can only be of power-law type.…
We propose a continuous-time model of trading with heterogeneous beliefs. Risk-neutral agents face quadratic costs-of-carry on positions and thus their marginal valuations decrease with the size of their position, as it would be the case…
This paper offers a systematic investigation on the existence of equivalent local martingale deflators, which are multiplicative special semimartingales, in financial markets given by positive semimartingales. In particular, it shows that…
We investigate the links between various no-arbitrage conditions and the existence of pricing functionals in general markets, and prove the Fundamental Theorem of Asset Pricing therein. No-arbitrage conditions, either in this abstract…
In this study, we consider the asset pricing under model uncertainty with discrete time and states structure. For the single-period securities model, we give a novel definition of arbitrage under a family of probability, and explore of its…
A concept of martingale-fair index of return, consistent with Arbitrage Free Pricing Theory, is introduced. An explicit formula for the average rate of return of a group of investment/pension funds in a discrete time stochastic model is…
Given the univariate marginals of a real-valued, continuous-time martingale, (respectively, a family of measures parameterised by $t \in [0,T]$ which is increasing in convex order, or a double continuum of call prices) we construct a family…