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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…
We investigate the problem of pricing and hedging derivatives of Electricity Futures contract when the underlying asset is not available. We propose to use a cross hedging strategy based on the Futures contract covering the larger delivery…
In this paper we provide a quantitative analysis to the concept of arbitrage, that allows to deal with model uncertainty without imposing the no-arbitrage condition. In markets that admit ``small arbitrage", we can still make sense of the…
We study the identification and estimation of first-price auction models where bidders have ambiguity about the valuation distribution and their preferences are represented by maxmin expected utility. When entry is exogenous, the…
We consider a continuous-time game-theoretic model of an investment market with short-lived assets and endogenous asset prices. The first goal of the paper is to formulate a stochastic equation which determines wealth processes of investors…
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…
In this study, we investigate asset price bubbles in a discrete-time, discrete-state market under model uncertainty and short sales prohibitions. Building on a new fundamental theorem of asset pricing and a superhedging duality in this…
I demonstrate that with the market return determined by the equilibrium returns of the CAPM, expected returns of an asset are affected by the risks of all assets jointly. Another implication is that the range of feasible market returns will…
In the present article we use the quantum formalism to describe the effects of risk and ambiguity in decision theory. The main idea is that the probabilities in the classic theory of expected utility are estimated probabilities, and thus do…
In this paper we present a theoretical framework for determining dynamic ask and bid prices of derivatives using the theory of dynamic coherent acceptability indices in discrete time. We prove a version of the First Fundamental Theorem of…
Optimal B-robust estimate is constructed for multidimensional parameter in drift coefficient of diffusion type process with small noise. Optimal mean-variance robust (optimal V -robust) trading strategy is find to hedge in mean-variance…
We introduce a setup of model uncertainty in discrete time. In this setup we derive dual expressions for the super--replication prices of game options with upper semicontinuous payoffs. We show that the super--replication price is equal to…
This paper proposes a risk-averse approach to energy storage price arbitrage, leveraging conformal uncertainty quantification for electricity price predictions. The method addresses the significant challenges posed by the inherent…
We consider the Brownian market model and the problem of expected utility maximization of terminal wealth. We, specifically, examine the problem of maximizing the utility of terminal wealth under the presence of transaction costs of a…
A simple statement and accessible proof of a version of the Fundamental Theorem of Asset Pricing in discrete time is provided. Careful distinction is made between prices and cash flows in order to provide uniform treatment of all…
For incomplete preference relations that are represented by multiple priors and/or multiple -- possibly multivariate -- utility functions, we define a certainty equivalent as well as the utility buy and sell prices and indifference price…
These notes discuss several topics in neoclassical economics and alternatives, with an aim of reviewing fundamental issues in modeling economic markets. I start with a brief, non-rigorous summary of the basic Arrow-Debreu model of general…
This paper will examine a model with many agents, each of whom has a different belief about the dynamics of a risky asset. The agents are Bayesian and so learn about the asset over time. All agents are assumed to have a finite (but random)…
Approximations to utility indifference prices are provided for a contingent claim in the large position size limit. Results are valid for general utility functions on the real line and semi-martingale models. It is shown that as the…
We consider the robust exponential utility maximization problem in discrete time: An investor maximizes the worst case expected exponential utility with respect to a family of nondominated probabilistic models of her endowment by…