Related papers: General indifference pricing with small transactio…
The main result of the paper is a version of the fundamental theorem of asset pricing (FTAP) for large financial markets based on an asymptotic concept of no market free lunch for monotone concave preferences. The proof uses methods from…
We study consumption dependence in the context of random utility and repeated choice. We show that, in the presence of consumption dependence, the random utility model is a misspecified model of repeated rational choice. This…
We present an adaptive approach for valuing the European call option on assets with stochastic volatility. The essential feature of the method is a reduction of uncertainty in latent volatility due to a Bayesian learning procedure. Starting…
We introduce pricing formulas for competition and collusion models of two-sided markets with an outside option. For the competition model, we find conditions under which prices and consumer surplus may increase or decrease if the outside…
We extend well-known comparative results under expected utility to models of non-expected utility by providing novel conditions on local utility functions. We illustrate how our results parallel, and are distinct from, existing results for…
The call auction is a widely used trading mechanism, especially during the opening and closing periods of financial markets. In this paper, we study a standard call auction problem where orders are submitted according to Poisson processes,…
We consider a financial model with permanent price impact. Continuous time trading dynamics are derived as the limit of discrete rebalancing policies. We then study the problem of super-hedging a European option. Our main result is the…
We develop from basic economic principles a continuous-time model for a large investor who trades with a finite number of market makers at their utility indifference prices. In this model, the market makers compete with their quotes for the…
We consider the inhomogeneous Dirichlet problem on product domains. The main result is the asymptotic expansion of the solution in terms of increasing smoothness up to the boundary. In particular, we show the exact nature of the…
Asymptotic expansions for generalised trigonometric integrals are obtained in terms of elementary functions, which are valid for large values of the parameter $a$ and unbounded complex values of the argument. These follow from new…
This paper deals with the problem of discrete-time option pricing by the mixed fractional version of Merton model with transaction costs. By a mean-self-financing delta hedging argument in a discrete-time setting, a European call option…
Stability of the utility maximization problem with random endowment and indifference prices is studied for a sequence of financial markets in an incomplete Brownian setting. Our novelty lies in the nonequivalence of markets, in which the…
It is well-known that, in the Bachelier model, when asset prices and volatilities are uncorrelated, the implied volatility coincides with the fair value of the volatility swap. In this paper, via classical It\^o calculus and Taylor…
Decentralized resource allocation is a key problem for large-scale autonomic (or self-managing) computing systems. Motivated by a data center scenario, we explore efficient techniques for resolving resource conflicts via cooperative…
In this paper we have devised an alternative methodological approach for quantifying utility in terms of expected information content of the decision-maker's choice set. We have proposed an extension to the concept of utility by…
We ask if participants in a choice experiment with repeated presentation of the same menus and no feedback provision: (i) exhibit overall behaviour that is consistent with ordinal and expected utility theory under *weak* preferences; (ii)…
Refining a discrete model of Cheuk and Vorst we obtain a closed formula for the price of a European lookback option at any time between emission and maturity. We derive an asymptotic expansion of the price as the number of periods tends to…
Recent literature in the last Maximum Entropy workshop introduced an analogy between cumulative probability distributions and normalized utility functions. Based on this analogy, a utility density function can de defined as the derivative…
Transaction costs play a critical role in asset allocation and consumption strategies in portfolio management. We apply the methods of dynamic programming and singular perturbation expansion to derive the closed-form leading solutions to…
We consider the problem of calculating risk-neutral implied volatilities of European options without relying on option mid prices but solely on bid and ask prices. We provide an approach, based on the conic finance paradigm, that allows to…