Related papers: Option Pricing in an Imperfect World
We consider the problem of allocating indivisible goods in a way that is fair, using one of the leading market mechanisms in economics: the competitive equilibrium from equal incomes. Focusing on two major classes of valuations, namely…
The pricing and hedging of a general class of options (including American, Bermudan and European options) on multiple assets are studied in the context of currency markets where trading is subject to proportional transaction costs, and…
We initiate the study of efficient mechanism design with guaranteed good properties even when players participate in multiple different mechanisms simultaneously or sequentially. We define the class of smooth mechanisms, related to smooth…
In this paper, we propose an equilibrium pricing model in a dynamic multi-period stochastic framework with uncertain income streams. In an incomplete market, there exist two traded risky assets (e.g. stock/commodity and weather derivative)…
We study the equilibria of uniform price auctions where many asymmetric bidders have flat demands up to their respective quantity constraints. We present an iterative procedure that systematically finds an equilibrium outcome as well as an…
In an incomplete semimartingale model of a financial market, we consider several risk-averse financial agents who negotiate the price of a bundle of contingent claims. Assuming that the agents' risk preferences are modelled by convex…
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…
We consider statistical estimation of superhedging prices using historical stock returns in a frictionless market with d traded assets. We introduce a plugin estimator based on empirical measures and show it is consistent but lacks suitable…
A new approximate Bayesian inferential framework is proposed that exploits multiple information sources -- daily spot returns, high-frequency spot data and option prices -- and enables fast calculation of probabilistic predictions of future…
This paper studies nonparametric identification and counterfactual bounds for heterogeneous firms that can be ranked in terms of productivity. Our approach works when quantities and prices are latent, rendering standard approaches…
We propose a continuous-time model of trading with heterogeneous beliefs. Risk-neutral agents face quadratic costs-of-carry on positions and thus their marginal valuations decrease with the size of their position, as it would be the case…
For a converging sequence of exponential L\'evy models, we give conditions under which the associated sequence of option prices converges. We also study the behaviour of the prices when no such convergence holds. We then consider two…
Existing approaches to asset-pricing under model-uncertainty adapt classical utility-maximization frameworks and seek theoretical comprehensiveness. We move toward practice by considering binary model-risks and by emphasizing 'constraints'…
We prove a version of the fundamental theorem of asset pricing (FTAP) in continuous time that is based on the strict no-arbitrage condition and that is applicable to both frictionless markets and markets with proportional transaction costs.…
In this paper, I consider a simple heterogeneous agents model of a production economy with uncertain climate change and examine constrained efficient carbon taxation. If there are frictionless, complete financial markets, the simple model…
We introduce a discrete binary tree for pricing contingent claims with the underlying security prices exhibiting history dependence characteristic of that induced by market microstructure phenomena. Example dependencies considered include…
Drawing on set theory, this paper contributes to a deeper understanding of the structural condition of mathematical finance under Knightian uncertainty. We adopt a projective framework in which all components of the model -- prices, priors…
In a model free discrete time financial market, we prove the superhedging duality theorem, where trading is allowed with dynamic and semi-static strategies. We also show that the initial cost of the cheapest portfolio that dominates a…
This paper aims to provide a practical example on the assessment and propagation of input uncertainty for option pricing when using tree-based methods. Input uncertainty is propagated into output uncertainty, reflecting that option prices…
In a discrete-time setting, we study arbitrage concepts in the presence of convex trading constraints. We show that solvability of portfolio optimization problems is equivalent to absence of arbitrage of the first kind, a condition weaker…