Related papers: Consistent Price Systems under Model Uncertainty

We introduce and study a non-equilibrium continuous-time dynamical model of the price of a single asset traded by a population of heterogeneous interacting agents in the presence of uncertainty and regulatory constraints. The model takes…

In this article we show how to analyze the covariation of bond prices nonparametrically and robustly, staying consistent with a general no-arbitrage setting. This is, in particular, motivated by the problem of identifying the number of…

It is shown that absence of arbitrage opportunity in financial markets is a particular case of existence of uncertainty in decision system. Absence of arbitrage opportunity is considered in the sense of the Arrow-Debreu model of financial…

We study contingent claims in a discrete-time market model where trading costs are given by convex functions and portfolios are constrained by convex sets. In addition to classical frictionless markets and markets with transaction costs or…

We study risk-sharing economies where heterogenous agents trade subject to quadratic transaction costs. The corresponding equilibrium asset prices and trading strategies are characterised by a system of nonlinear, fully-coupled…

For portfolio choice problems with proportional transaction costs, we discuss whether or not there exists a "shadow price", i.e., a least favorable frictionless market extension leading to the same optimal strategy and utility. By means of…

We study a robust utility maximization problem in a general discrete-time frictionless market under quasi-sure no-arbitrage. The investor is assumed to have a random and concave utility function defined on the whole real-line. She also…

The objective of this paper is to provide a comprehensive study no-arbitrage pricing of financial derivatives in the presence of funding costs, the counterparty credit risk and market frictions affecting the trading mechanism, such as…

No-arbitrage models of term structure have the feature that the return on zero-coupon bonds is the sum of the short rate and the product of volatility and market price of risk. Well known models restrict the behavior of the market price of…

In this paper we derive robust super- and subhedging dualities for contingent claims that can depend on several underlying assets. In addition to strict super- and subhedging, we also consider relaxed versions which, instead of eliminating…

We introduce the concept of no-arbitrage in a credit risk market under ambiguity considering an intensity-based framework. We assume the default intensity is not exactly known but lies between an upper and lower bound. By means of the…

This short note provides a systematic construction of market models without unbounded profits but with arbitrage opportunities.

In a market with transaction costs, the price of a derivative can be expressed in terms of (preconsistent) price systems (after Kusuoka (1995)). In this paper, we consider a market with binomial model for stock price and discuss how to…

We propose a Fundamental Theorem of Asset Pricing and a Super-Replication Theorem in a model-independent framework. We prove these theorems in the setting of finite, discrete time and a market consisting of a risky asset S as well as…

We consider a discrete time financial market with proportional transaction costs under model uncertainty, and study a num\'eraire-based semi-static utility maximization problem with an exponential utility preference. The randomization…

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…

We provide a critical analysis of the proof of the fundamental theorem of asset pricing given in the paper "Arbitrage and approximate arbitrage: the fundamental theorem of asset pricing" by B. Wong and C.C. Heyde (Stochastics, 2010) in the…

We consider a discrete time financial market with proportional transaction cost under model uncertainty, and study a super-replication problem. We recover the duality results that are well known in the classical dominated context. Our key…

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 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…