Related papers: Hedging Expected Losses on Derivatives in Electric…
The Black-Scholes option pricing model remains a cornerstone in financial mathematics, yet its application is often challenged by the need for accurate hedging strategies, especially in dynamic market environments. This paper presents a…
We provide a model-free pricing-hedging duality in continuous time. For a frictionless market consisting of $d$ risky assets with continuous price trajectories, we show that the purely analytic problem of finding the minimal superhedging…
We investigate the profitability and risk of energy storage arbitrage in electricity markets under price uncertainty, exploring both robust and chance-constrained optimization approaches. We analyze various uncertainty representations,…
We study the situation of an agent who can trade on a financial market and can also transform some assets into others by means of a production system, in order to price and hedge derivatives on produced goods. This framework is motivated by…
In incomplete financial markets, pricing and hedging European options lack a unique no-arbitrage solution due to unhedgeable risks. This paper introduces a constrained deep learning approach to determine option prices and hedging strategies…
Paper is based on "The cost of illiquidity and its effects on hedging", L. C. G. Rogers and Surbjeet Singh, 2010. We generalize its thesis to constant elasticity model, which own previously used Black-Schoels model as a special case. The…
We study the valuation and hedging problem of European options in a market subject to liquidity shocks. Working within a Markovian regime-switching setting, we model illiquidity as the inability to trade. To isolate the impact of such…
We consider the problem of hedging a European contingent claim in a Bachelier model with transient price impact as proposed by Almgren and Chriss. Following the approach of Rogers and Singh and Naujokat and Westray, the hedging problem can…
The problem of stock hedging is reconsidered in this paper, where a put option is chosen from a set of available put options to hedge the market risk of a stock. A formula is proposed to determine the probability that the potential loss…
We develop a robust framework for pricing and hedging of derivative securities in discrete-time financial markets. We consider markets with both dynamically and statically traded assets and make minimal measurability assumptions. We obtain…
This paper formulates a model of utility for a continuous time framework that captures the decision-maker's concern with ambiguity about both volatility and drift. Corresponding extensions of some basic results in asset pricing theory are…
We consider portfolio optimization in futures markets. We model the entire futures price curve at once as a solution of a stochastic partial differential equation. The agents objective is to maximize her utility from the final wealth when…
We describe the pricing and hedging of financial options without the use of probability using rough paths. By encoding the volatility of assets in an enhancement of the price trajectory, we give a pathwise presentation of the replication of…
The presence of variable renewable energy resources with uncertain outputs in day-ahead electricity markets results in additional balancing needs in real-time. Addressing those needs cost-effectively and reliably within a competitive market…
This study deals with the problem of pricing European currency options in discrete time setting, whose prices follow the fractional Black Scholes model with transaction costs. Both the pricing formula and the fractional partial differential…
We study the pricing and hedging of derivative securities with uncertainty about the volatility of the underlying asset. Rather than taking all models from a prespecified class equally seriously, we penalise less plausible ones based on…
We propose a pricing technique based on coherent risk measures, which enables one to get finer price intervals than in the No Good Deals pricing. The main idea consists in splitting a liability into several parts and selling these parts to…
Existing electricity market designs assume risk neutrality and lack risk-hedging instruments, which leads to suboptimal market outcomes and reduces the overall market efficiency. This paper enables risk-trading in the chance-constrained…
Market-based coordination of demand side assets has gained great interests in recent years. In spite of its efficiency, there is a risk that the interaction between the dynamic assets through the price signal could result in an unstable…
Locational Marginal Price (LMP) is a dual variable associated with supply-demand matching and represents the cost of delivering power to a particular location if the load at that location increases. In recent times it become more volatile…