Related papers: Negative Call Prices
We study reserve prices in auctions with independent private values when bidders are expectations-based loss averse. We find that the optimal public reserve price excludes fewer bidder types than under risk neutrality. Moreover, we show…
An investor's risk aversion is assumed to tend to infinity. In a fairly general setting, we present conditions ensuring that the respective utility indifference prices of a given contingent claim converge to its super replication price.
A discretization scheme for nonnegative diffusion processes is proposed and the convergence of the corresponding sequence of approximate processes is proved using the martingale problem framework. Motivations for this scheme come typically…
In this paper, we consider the problem of equal risk pricing and hedging in which the fair price of an option is the price that exposes both sides of the contract to the same level of risk. Focusing for the first time on the context where…
This paper formulates an utility indifference pricing model for investors trading in a discrete time financial market under non-dominated model uncertainty. The investors preferences are described by strictly increasing concave random…
We study the martingale property and moment explosions of a signature volatility model, where the volatility process of the log-price is given by a linear form of the signature of a time-extended Brownian motion. Excluding trivial cases, we…
This paper quantifies the interplay between the non-arbitrage notion of No-Unbounded-Profit-with-Bounded-Risk (NUPBR hereafter) and additional information generated by a random time. This study complements the one of…
Real life hedging in the Black-Scholes model must be imperfect and if the stock's drift is higher than the risk free rate, leads to a profit on average. Hence the option price is examined as a fair game agreement between the parties, based…
We develop two alternate approaches to arbitrage-free, market-complete, option pricing. The first approach requires no riskless asset. We develop the general framework for this approach and illustrate it with two specific examples. The…
We develop a version of the fundamental theorem of asset pricing for discrete-time markets with proportional transaction costs and model uncertainty. A robust notion of no-arbitrage of the second kind is defined and shown to be equivalent…
We generalize Merton's asset valuation approach to systems of multiple financial firms where cross-ownership of equities and liabilities is present. The liabilities, which may include debts and derivatives, can be of differing seniority. We…
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…
We price and replicate a variety of claims written on the log price $X$ and quadratic variation $[X]$ of a risky asset, modeled as a positive semimartingale, subject to stochastic volatility and jumps. The pricing and hedging formulas do…
We study the stability of several no-arbitrage conditions with respect to absolutely continuous, but not necessarily equivalent, changes of measure. We first consider models based on continuous semimartingales and show that no-arbitrage…
Based on a criterium of mathematical simplicity and consistency with empirical market data, a stochastic volatility model has been obtained with the volatility process driven by fractional noise. Depending on whether the stochasticity…
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 discuss the finding that cross-sectional characteristic based models have yielded portfolios with higher excess monthly returns but lower risk than their arbitrage pricing theory counterparts in an analysis of equity returns of stocks…
We consider a financial market with one riskless and one risky asset. The super-replication theorem states that there is no duality gap in the problem of super-replicating a contingent claim under transaction costs and the associated dual…
We provide a Fundamental Theorem of Asset Pricing and a Superhedging Theorem for a model independent discrete time financial market with proportional transaction costs. We consider a probability-free version of the Robust No Arbitrage…
We present an empirical argument against the existence of single timeline backward time travel using the price behavior of prediction markets. If rational agents could travel backward in time, binary prediction contracts would converge to…