Related papers: Fair bilateral prices in Bergman's model
The classical discrete time model of proportional transaction costs relies on the assumption that a feasible portfolio process has solvent increments at each step. We extend this setting in two directions, allowing for convex transaction…
This paper includes a proof of well-posedness of an initial-boundary value problem involving a system of degenerate non-local parabolic PDE which naturally arises in the study of derivative pricing in a generalized market model. In a…
Nonconvexities in markets with discrete decisions and nonlinear constraints make efficient pricing challenging, often necessitating subsidies. A prime example is the unit commitment (UC) problem in electricity markets, where costly…
This paper evaluates market equilibrium under different pricing mechanisms in a two-settlement 100%-renewables electricity market. Given general probability distributions of renewable energy, we establish game-theoretical models to analyze…
We consider derivatives written on multiple underlyings in a one-period financial market, and we are interested in the computation of model-free upper and lower bounds for their arbitrage-free prices. We work in a completely realistic…
In this paper, we provide a model-independent extension of the paradigm of dynamic hedging of derivative claims. We relate model-independent replication strategies to local martingales having a closed form which we can characterise via…
We study the pricing and hedging of European spread options on correlated assets when, in contrast to the standard framework and consistent with imperfect liquidity markets, the trading in the stock market has a direct impact on stocks…
This paper presents a new model for options pricing. The Black-Scholes-Merton (BSM) model plays an important role in financial options pricing. However, the BSM model assumes that the risk-free interest rate, volatility, and equity premium…
This paper builds on "Collective Arbitrage and the Value of Cooperation" by Biagini et al. (2025, forthcoming in "Finance and Stochastics"), which introduced in discrete time the notions of collective arbitrage and super-replication in a…
We develop a unified valuation theory that incorporates credit risk (defaults), collateralization and funding costs, by expanding the replication approach to a generality that has not yet been studied previously and reaching valuation when…
We present an arbitrage free theoretical framework for modeling bid and ask prices of dividend paying securities in a discrete time setup using theory of dynamic acceptability indices. In the first part of the paper we develop the theory of…
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…
We study a continuous-time financial market with continuous price processes under model uncertainty, modeled via a family $\mathcal{P}$ of possible physical measures. A robust notion ${\rm NA}_{1}(\mathcal{P})$ of no-arbitrage of the first…
We consider a continuous-time financial market with no arbitrage and no transactions costs. In this setting, we introduce two types of perpetual contracts, one in which the payoff to the long side is a fixed function of the underlyers and…
We will compare three types of prices, namely, rational (hedging) prices, geometric (growth rate) prices, and martingale (measure) prices. We will show that rational prices in the complete market theory are sometimes contrary to common…
In this work we study the price-hedge issue for general defaultable contracts characterized by the presence of a contingent CSA of switching type. This is a contingent risk mitigation mechanism that allow the counterparties of a defaultable…
In a discrete-time financial market, a generalized duality is established for model-free superhedging, given marginal distributions of the underlying asset. Contrary to prior studies, we do not require contingent claims to be upper…
This thesis develops a new framework for modelling price processes in finance, such as an equity price or foreign exchange rate. This can be related to the conventional Ito calculus-based framework through the time integral of a price's…
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…
Model risk measures consequences of choosing a model in a class of possible alternatives. We find analytical and simulated bounds for payoff functions on classes of plausible alternatives of a given discrete model. We measure the impact of…