Related papers: Probabilistic aspects of finance
Quantum computers have the potential to provide an advantage for financial pricing problems by the use of quantum estimation. In a broader context, it is reasonable to ask about situations where the market and the assets traded on the…
Pari-mutuel markets are trading platforms through which the common market maker simultaneously clears multiple contingent claims markets. This market has several distinctive properties that began attracting the attention of the financial…
Regression plays a key role in many research areas and its variable selection is a classic and major problem. This study emphasizes cost of predictors to be purchased for future use, when we select a subset of them. Its economic aspect is…
We present a methodology for representing probabilistic relationships in a general-equilibrium economic model. Specifically, we define a precise mapping from a Bayesian network with binary nodes to a market price system where consumers and…
Accurately estimating uncertainties in neural network predictions is of great importance in building trusted DNNs-based models, and there is an increasing interest in providing accurate uncertainty estimation on many tasks, such as security…
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…
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…
We discuss several aspects of creation of adequate mathematical models in other sciences. In particular, many difficulties stem from great complexity of the source systems and the presence of a variety of uncertain factors. We illustrate…
We consider derivatives written on multiple underlyings in a one-period financial market, and we are interested in the computation of model-free upper and lower bounds for their arbitrage-free prices. We work in a completely realistic…
Expanding the ideas of the author's paper 'Nonexpansive maps and option pricing theory' (Kibernetica 34:6 (1998), 713-724) we develop a pure game-theoretic approach to option pricing, by-passing stochastic modeling. Risk neutral…
Although both data availability and the demand for accurate forecasts are increasing, collaboration between stakeholders is often constrained by data ownership and competitive interests. In contrast to recent proposals within cooperative…
This paper enhances the pricing of derivatives as well as optimal control problems to a level comprising risk. We employ nested risk measures to quantify risk, investigate the limiting behavior of nested risk measures within the classical…
The purpose of this work is to explore the role that arbitrage opportunities play in pricing financial derivatives. We use a non-equilibrium model to set up a stochastic portfolio, and for the random arbitrage return, we choose a stationary…
The paper studies pricing of insurance products focusing on the pricing of annuities under uncertainty. This pricing problem is crucial for financial decision making and was studied intensively, however, many open questions still remain. In…
This paper studies an equity market of stochastic dimension, where the number of assets fluctuates over time. In such a market, we develop the fundamental theorem of asset pricing, which provides the equivalence of the following statements:…
We investigate the impact of Knightian uncertainty on the optimal timing policy of an ambiguity averse decision maker in the case where the underlying factor dynamics follow a multidimensional Brownian motion and the exercise payoff depends…
Uncertainty, characterised by randomness and stochasticity, is ubiquitous in applications of evolutionary game theory across various fields, including biology, economics and social sciences. The uncertainty may arise from various sources…
We give elementary examples within a framework for studying decisions under uncertainty where probabilities are only roughly known. The framework, in gambling terms, is that the size of a bet is proportional to the gambler's perceived…
Dealing with quadratic payments, marginal probability is usually considered ideally constant, maybe for the sake of initial simplicity. Considering the voting scenario depicted in "Quadratic Payments: A Primer" by Vitalik Buterin, firstly…