Related papers: Pseudo Linear Pricing Rule for Utility Indifferenc…
This paper introduces the exponential substitution calculus (ESC), a new presentation of cut elimination for IMELL, based on proof terms and building on the idea that exponentials can be seen as explicit substitutions. The idea in itself is…
We propose an axiomatic approach which economically underpins the representation of dynamic preferences in terms of a stochastic utility function, sensitive to the information available to the decision maker. Our construction is iterative…
This article presents a finite element method (FEM) for a partial integro-differential equation (PIDE) to price two-asset options with underlying price processes modeled by an exponential Levy process. We provide a variational formulation…
Bayesian decision theory outlines a rigorous framework for making optimal decisions based on maximizing expected utility over a model posterior. However, practitioners often do not have access to the full posterior and resort to approximate…
We introduce a new approach for the numerical pricing of American options. The main idea is to choose a finite number of suitable excessive functions (randomly) and to find the smallest majorant of the gain function in the span of these…
In the accompanied paper [14], a delayed nonlinear model for pricing corporate liabilities was developed. Using self-financed strategy and duplication we were able to derive two Random Partial Differential Equations (RPDEs) describing the…
We consider that the price of a firm follows a non linear stochastic delay differential equation. We also assume that any claim value whose value depends on firm value and time follows a non linear stochastic delay differential equation.…
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…
The purpose of this review paper is to present our recent results on nonlinear and nonlocal mathematical models arising from modern financial mathematics. It is based on our four papers written jointly by J. Cruz, M. Grossinho, D. Sevcovic,…
Interference between treated and untreated units is a source of bias in marketplace experiments. In this paper, we specifically consider pricing interventions, in which a platform seeks to adjust base pricing levels at the marketplace level…
Parabolic partial differential equations (PDEs) and backward stochastic differential equations (BSDEs) have a wide range of applications. In particular, high-dimensional PDEs with gradient-dependent nonlinearities appear often in the…
The extension of the classical Bayesian penalized spline method to inference on vector-valued functions is considered, with an emphasis on characterizing the suitability of the method for general application.We show that the standard…
We consider the problem of option hedging in a market with proportional transaction costs. Since super-replication is very costly in such markets, we replace perfect hedging with an expected loss constraint. Asymptotic analysis for small…
We use the maximum entropy principle for pricing the non-life insurance and recover the B\"{u}hlmann results for the economic premium principle. The concept of economic equilibrium is revised in this respect.
In the multi-unit pricing problem, multiple units of a single item are for sale. A buyer's valuation for $n$ units of the item is $v \min \{ n, d\} $, where the per unit valuation $v$ and the capacity $d$ are private information of the…
The paper introduces benchmark-neutral pricing and hedging for long-term contingent claims. It employs the growth optimal portfolio of the stocks as numeraire and the new benchmark-neutral pricing measure for pricing. For a realistic…
While deep learning gradually penetrates operational planning, its inherent prediction errors may significantly affect electricity prices. This letter examines how prediction errors propagate into electricity prices, revealing notable…
This work takes up the challenges of utility maximization problem when the market is indivisible and the transaction costs are included. First there is a so-called solvency region given by the minimum margin requirement in the problem…
Our paper aims to model and forecast the electricity price by taking a completely new perspective on the data. It will be the first approach which is able to combine the insights of market structure models with extensive and modern…
Market-based mechanisms such as auctions are being studied as an appropriate means for resource allocation in distributed and mulitagent decision problems. When agents value resources in combination rather than in isolation, they must often…