Related papers: Quantile Hedging in a Semi-Static Market with Mode…
Proof that under simple assumptions, such as constraints of Put-Call Parity, the probability measure for the valuation of a European option has the mean derived from the forward price which can, but does not have to be the risk-neutral one,…
A discretization scheme for nonnegative diffusion processes is proposed and the convergence of the corresponding sequence of approximate processes is proved using the martingale problem framework. Motivations for this scheme come typically…
This paper considers equity premium prediction, for which mean regression can be problematic due to heteroscedasticity and heavy-tails of the error. We show advantages of quantile predictions using a novel penalized quantile regression that…
This paper studies an equity market of stochastic dimension, where the number of assets fluctuates over time. In such a market, we develop the fundamental theorem of asset pricing, which provides the equivalence of the following statements:…
This paper uses the development of multi-agent market models to present a unified approach to the joint questions of how financial market movements may be simulated, predicted, and hedged against. We examine the effect of different market…
We study option pricing and hedging with uncertainty about a Black-Scholes reference model which is dynamically recalibrated to the market price of a liquidly traded vanilla option. For dynamic trading in the underlying asset and this…
This work discusses the finite element discretization of an optimal control problem for the linear wave equation with time-dependent controls of bounded variation. The main focus lies on the convergence analysis of the discretization…
In a model with no given probability measure, we consider asset pricing in the presence of frictions and other imperfections and characterize the property of coherent pricing, a notion related to (but much weaker than) the no arbitrage…
We consider the optimal investment and marginal utility pricing problem of a risk averse agent and quantify their exposure to a small amount of model uncertainty. Specifically, we compute explicitly the first-order sensitivity of their…
This paper enhances the pricing of derivatives as well as optimal control problems to a level comprising risk. We employ nested risk measures to quantify risk, investigate the limiting behavior of nested risk measures within the classical…
We study the capability of arbitrage-free neural-SDE market models to yield effective strategies for hedging options. In particular, we derive sensitivity-based and minimum-variance-based hedging strategies using these models and examine…
The problem of determining the European-style option price in the incomplete market has been examined within the framework of stochastic optimization. An analytic method based on the discrete dynamic programming equation (Bellman equation)…
We introduce an event based framework of directional changes and overshoots to map continuous financial data into the so-called Intrinsic Network - a state based discretisation of intrinsically dissected time series. Defining a method for…
In this work, we consider the hedging error due to discrete trading in models with jumps. Extending an approach developed by Fukasawa [In Stochastic Analysis with Financial Applications (2011) 331-346 Birkh\"{a}user/Springer Basel AG] for…
It has been assumed that arbitrage profits are not possible in efficient markets, because future prices are not predictable. Here we show that predictability alone is not a sufficient measure of market efficiency. We instead propose to…
Model-based process simulation can be used to derive designs and operating conditions of chemical processes that optimally balance multiple objectives, such as quality, costs, or environmental impacts. This work focuses on identifying…
We expose a theoretical hedging optimization framework with variational preferences under convex risk measures. We explore a general dual representation for the composition between risk measures and utilities. We study the properties of the…
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…
In this paper, we consider the problem of equal risk pricing and hedging in which the fair price of an option is the price that exposes both sides of the contract to the same level of risk. Focusing for the first time on the context where…
We consider an agent who has access to a financial market, including derivative contracts, who looks to maximise her utility. Whilst the agent looks to maximise utility over one probability measure, or class of probability measures, she…