Related papers: A Multi Period Equilibrium Pricing Model
The accurate prediction of short-term electricity prices is vital for effective trading strategies, power plant scheduling, profit maximisation and efficient system operation. However, uncertainties in supply and demand make such…
In this paper, we formulate a general time-inconsistent stochastic linear--quadratic (LQ) control problem. The time-inconsistency arises from the presence of a quadratic term of the expected state as well as a state-dependent term in the…
Model uncertainty is a type of inevitable financial risk. Mistakes on the choice of pricing model may cause great financial losses. In this paper we investigate financial markets with mean-volatility uncertainty. Models for stock markets…
We study a financial model with a non-trivial price impact effect. In this model we consider the interaction of a large investor trading in an illiquid security, and a market maker who is quoting prices for this security. We assume that the…
Due to the limited predictability of wind power and other stochastic generation, trading this energy in competitive electricity markets is challenging. This paper derives revenue-maximising and risk-constrained strategies for stochastic…
In a market with one safe and one risky asset, an investor with a long horizon, constant investment opportunities, and constant relative risk aversion trades with small proportional transaction costs. We derive explicit formulas for the…
We study the optimal timing of derivative purchases in incomplete markets. In our model, an investor attempts to maximize the spread between her model price and the offered market price through optimally timing her purchase. Both the…
We study a generalization of the model of a dark market due to Duffie-G\^arleanu- Pedersen [6]. Our market is segmented and involves multiple assets. We show that this market has a unique asymptotically stable equilibrium. In order to…
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…
The stochastic multi-armed bandit has provided a framework for studying decision-making in unknown environments. We propose a variant of the stochastic multi-armed bandit where the rewards are sampled from a stochastic linear dynamical…
In intertemporal settings, the multiattribute utility theory of Kihlstrom and Mirman suggests the application of a concave transform of the lifetime utility index. This construction, while allowing time and risk attitudes to be separated,…
This article considers the pricing and hedging of a call option when liquidity matters, that is, either for a large nominal or for an illiquid underlying asset. In practice, as opposed to the classical assumptions of a price-taking agent in…
We introduce a stochastic price model where, together with a random component, a moving average of logarithmic prices contributes to the price formation. Our model is tested against financial datasets, showing an extremely good agreement…
We show that financial correlations exhibit a non-trivial dynamic behavior. We introduce a simple phenomenological model of a multi-asset financial market, which takes into account the impact of portfolio investment on price dynamics. This…
The Combinatorial Multi-Round Ascending Auction (CMRA) is a new auction format used in recent European spectrum auctions. We show that an auction-specific version of truthful bidding leads to an efficient allocation. We then characterize…
The question of pricing and hedging a given contingent claim has a unique solution in a complete market framework. When some incompleteness is introduced, the problem becomes however more difficult. Several approaches have been adopted in…
The problem of multi-area interchange scheduling under system uncertainty is considered. A new scheduling technique is proposed for a multi-proxy bus system based on stochastic optimization that captures uncertainty in renewable generation…
This work extends a previous work in regime detection, which allowed trading positions to be profitably adjusted when a new regime was detected, to ex ante prediction of regimes, leading to substantial performance improvements over the…
This paper develops a flexible and computationally efficient multivariate volatility model, which allows for dynamic conditional correlations and volatility spillover effects among financial assets. The new model has desirable properties…
We propose a frustrated and disordered many-body model of a stockmarket in which independent adaptive traders can trade a stock subject to the economic law of supply and demand. We show that the typical scaling properties and the correlated…