Related papers: Option Pricing in an Imperfect World

Given a finite set of European call option prices on a single underlying, we want to know when there is a market model which is consistent with these prices. In contrast to previous studies, we allow models where the underlying trades at a…

We develop robust pricing and hedging of a weighted variance swap when market prices for a finite number of co--maturing put options are given. We assume the given prices do not admit arbitrage and deduce no-arbitrage bounds on the weighted…

We solve the problem of super-hedging European or Asian options for discrete-time financial market models where executable prices are uncertain. The risky asset prices are not described by single-valued processes but measurable selections…

We consider a class of generalized capital asset pricing models in continuous time with a finite number of agents and tradable securities. The securities may not be sufficient to span all sources of uncertainty. If the agents have…

The objective of this paper is to introduce the theory of option pricing for markets with informed traders within the framework of dynamic asset pricing theory. We introduce new models for option pricing for informed traders in complete…

We study utility indifference prices and optimal purchasing quantities for a contingent claim, in an incomplete semi-martingale market, in the presence of vanishing hedging errors and/or risk aversion. Assuming that the average indifference…

We propose new results for the existence and uniqueness of a general nonparametric and nonseparable competitive equilibrium with substitutes. These results ensure the invertibility of a general competitive system. The existing literature…

The price of a stock will rarely follow the assumed model and a curious investor or a Regulatory Authority may wish to obtain a probability model the prices support. A risk neutral probability ${\cal P}^*$ for the stock's price at time $T$…

In recent literature it is claimed that BitCoin price behaves more likely to a volatile stock asset than a currency and that changes in its price are influenced by sentiment about the BitCoin system itself; in Kristoufek [10] the author…

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…

We investigate pricing-hedging duality for American options in discrete time financial models where some assets are traded dynamically and others, e.g. a family of European options, only statically. In the first part of the paper we…

This work focuses on the indifference pricing of American call option underlying a non-traded stock, which may be partially hedgeable by another traded stock. Under the exponential forward measure, the indifference price is formulated as a…

While auction theory views bids and valuations as continuous variables, real-world auctions are necessarily discrete. In this paper, we use a combination of analytical and computational methods to investigate whether incorporating…

We unify and establish equivalence between the pathwise and the quasi-sure approaches to robust modelling of financial markets in discrete time. In particular, we prove a Fundamental Theorem of Asset Pricing and a Superhedging Theorem,…

The paper has 2 main goals: 1. We propose a variant of the CAPM based on coherent risk. 2. In addition to the real-world measure and the risk-neutral measure, we propose the third one: the extreme measure. The introduction of this measure…

We consider a dynamic market model where buyers and sellers submit limit orders. If at a given moment in time, the buyer is unable to complete his entire order due to the shortage of sell orders at the required limit price, the unmatched…

We consider the pricing and hedging of exotic options in a model-independent set-up using \emph{shortfall risk and quantiles}. We assume that the marginal distributions at certain times are given. This is tantamount to calibrating the model…

We derive a new high-order compact finite difference scheme for option pricing in stochastic volatility models. The scheme is fourth-order accurate in space and second-order accurate in time. Under some restrictions, theoretical results…

In economics, there are many ways to describe the interaction between a "seller" and a "buyer". The most common one, with which we interact almost every day, is selling for a fixed price. This option is perfect for selling a mass product,…

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…