Related papers: A Multi Period Equilibrium Pricing Model
We present a multivariate stochastic volatility model with leverage, which is flexible enough to recapture the individual dynamics as well as the interdependencies between several assets while still being highly analytically tractable.…
The paper proposes a class of financial market models which are based on inhomogeneous telegraph processes and jump diffusions with alternating volatilities. It is assumed that the jumps occur when the tendencies and volatilities are…
Risk management is very important for individual investors or companies. There are many ways to measure the risk of investment. Prices of risky assets vary rapidly and randomly due to the complexity of finance market. Random interval is a…
We consider two market designs for a network of prosumers, trading energy: (i) a centralized design which acts as a benchmark, and (ii) a peer-to-peer market design. High renewable energy penetration requires that the energy market design…
We combine general equilibrium theory and theorie generale of stochastic processes to derive structural results about equilibrium state prices.
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.…
We introduce a multivariate stochastic volatility model for asset returns that imposes no restrictions to the structure of the volatility matrix and treats all its elements as functions of latent stochastic processes. When the number of…
We consider a financial market model which consists of a financial asset and a large number of interacting agents classified into many types. Different types of agents are heterogeneous in their price expectations. Each agent can change its…
Measuring model risk is required by regulators on financial and insurance markets. We separate model risk into parameter estimation risk and model specification risk, and we propose expected shortfall type model risk measures applied to…
Value adjustment of uncollateralized trades is determined within a risk-neutral pricing framework. When hedging such trades, investors cannot freely trade protection on their own name, thus facing an incomplete market. This fact is…
We study a an optimal high frequency trading problem within a market microstructure model designed to be a good compromise between accuracy and tractability. The stock price is driven by a Markov Renewal Process (MRP), while market orders…
We develop estimation and inference methods for a stylized macroeconomic model with potentially multiple behavioural equilibria, where agents form expectations using a constant-gain learning rule. We first show geometric ergodicity of the…
This study presents contemporaneous modeling of asset return and price range within the framework of stochastic volatility with leverage. A new representation of the probability density function for the price range is provided, and its…
We introduce an interactive market setup with sequential auctions where agents receive variegated signals with a known deadline. The effects of differential information and mutual learning on the allocation of overall profit \& loss (P\&L)…
The paper studies derivative asset analysis in structural credit risk models where the asset value of the firm is not fully observable. It is shown that in order to compute the price dynamics of traded securities one needs to solve a…
Finding Bertram's optimal trading strategy for a pair of cointegrated assets following the Ornstein--Uhlenbeck price difference process can be formulated as an unconstrained convex optimization problem for maximization of expected profit…
We provide closed-form market equilibrium formula consolidating informational imperfections and investors beliefs. Based on Merton's model, we characterize the equilibrium expected excess returns vector with incomplete information. We then…
The problem of determining the European-style option price in the incomplete market has been examined within the framework of stochastic optimization. An analytic method based on the discrete dynamic programming equation (Bellman equation)…
We introduce a class of randomly time-changed fast mean-reverting stochastic volatility models and, using spectral theory and singular perturbation techniques, we derive an approximation for the prices of European options in this setting.…
In this paper we present a framework for risk-sensitive model predictive control (MPC) of linear systems affected by stochastic multiplicative uncertainty. Our key innovation is to consider a time-consistent, dynamic risk evaluation of the…