Related papers: Do arbitrage-free prices come from utility maximiz…

Consider a financial market with nonnegative semimartingales which does not need to have a num\'{e}raire. We are interested in the absence of arbitrage in the sense that no self-financing portfolio gives rise to arbitrage opportunities,…

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…

This paper studies the utility maximization on the terminal wealth with random endowments and proportional transaction costs. To deal with unbounded random payoffs from some illiquid claims, we propose to work with the acceptable portfolios…

We consider a discrete-time model of a financial market where a risky asset is bought and sold with transactions having a transient price impact. It is shown that the corresponding utility maximization problem admits a solution. We manage…

In this paper we study the problem of maximizing expected utility from the terminal wealth with proportional transaction costs and random endowment. In the context of the existence of consistent price systems, we consider the duality…

This paper highlights the role of risk neutral investors in generating endogenous bubbles in derivatives markets. We find that a market for derivatives, which has all the features of a perfect market except completeness and has some risk…

We study a continuous-time expected utility maximization problem in which the investor at maturity receives the value of a contingent claim in addition to the investment payoff from the financial market. The investor knows nothing about the…

A stock market is called diverse if no stock can dominate the market in terms of relative capitalization. On one hand, this natural property leads to arbitrage in diffusion models under mild assumptions. On the other hand, it is also easy…

We perform a stability analysis for the utility maximization problem in a general semimartingale model where both liquid and illiquid assets (random endowments) are present. Small misspecifications of preferences (as modeled via expected…

We study the upper hedging price for contingent claims in market models with strong types of arbitrage: increasing profit, strong arbitrage, and arbitrage of the first kind. The existence of arbitrage may make the price smaller than if it…

We treat a discrete-time asset allocation problem in an arbitrage-free, generically incomplete financial market, where the investor has a possibly non-concave utility function and wealth is restricted to remain non-negative. Under easily…

In practice there are temporary arbitrage opportunities arising from the fact that prices for a given asset at different stock exchanges are not instantaneously the same. We will show that even in such an environment there exists a…

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…

American options are financial instruments that can be exercised at any time before expiration. In this paper we study the problem of pricing this kind of derivatives within a framework in which some of the properties --volatility and…

We consider the fundamental theorem of asset pricing (FTAP) and hedging prices of options under non-dominated model uncertainty and portfolio constrains in discrete time. We first show that no arbitrage holds if and only if there exists…

It has been assumed that arbitrage profits are not possible in efficient markets, because future prices are not predictable. Here we show that predictability alone is not a sufficient measure of market efficiency. We instead propose to…

We consider a discrete-time financial market model with finite time horizon and give conditions which guarantee the existence of an optimal strategy for the problem of maximizing expected terminal utility. Equivalent martingale measures are…

As operators acting on the undetermined final settlement of a derivative security, expectation is linear but price is non-linear. When the market of underlying securities is incomplete, non-linearity emerges from the bid-offer around the…

We explore the role that random arbitrage opportunities play in hedging financial derivatives. We extend the asymptotic pricing theory presented by Fedotov and Panayides [Stochastic arbitrage return and its implication for option pricing,…

We extend the fundamental theorem of asset pricing to a model where the risky stock is subject to proportional transaction costs in the form of bid-ask spreads and the bank account has different interest rates for borrowing and lending. We…