Related papers: Asset Pricing in an Imperfect World

This paper studies the equilibrium price of a continuous time asset traded in a market with heterogeneous investors. We consider a positive mean reverting asset and two groups of investors who have different beliefs on the speed of mean…

A solution to a portfolio optimization problem is always conditioned by constraints on the initial capital and the price of the available market assets. If a risk neutral measure is known, then the price of each asset is the discounted…

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…

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…

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…

We generalize classical results on the existence of optimal portfolios in discrete time frictionless market models to models with capital gains taxes. We consider the realistic but mathematically challenging rule that losses do not trigger…

This paper presents a stochastic model for discrete-time trading in financial markets where trading costs are given by convex cost functions and portfolios are constrained by convex sets. The model does not assume the existence of a cash…

In the information-based approach to asset pricing the market filtration is modelled explicitly as a superposition of signals concerning relevant market factors and independent noise. The rate at which the signal is revealed to the market…

We study a class of iterative combinatorial auctions which can be viewed as subgradient descent methods for the problem of pricing bundles to balance supply and demand. We provide concrete convergence rates for auctions in this class,…

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 investigate asymmetry of information in the context of robust approach to pricing and hedging of financial derivatives. We consider two agents, one who only observes the stock prices and another with some additional information, and…

We develop a market model in which products generate state-dependent potential hidden charges. Firms differ in their ability to realize this potential. Unlike firms, consumers do not observe the state. They try to infer hidden charges from…

This paper consists of two parts. In the first part we prove the fundamental theorem of asset pricing under short sales prohibitions in continuous-time financial models where asset prices are driven by nonnegative, locally bounded…

We propose a continuous time model for financial markets with proportional transactions costs and a continuum of risky assets. This is motivated by bond markets in which the continuum of assets corresponds to the continuum of possible…

In the past decades, advanced probabilistic methods have had significant impact on the field of finance, both in academia and in the financial industry. Conversely, financial questions have stimulated new research directions in probability.…

We consider arbitrage free valuation of European options in Black-Scholes and Merton markets, where the general structure of the market is known, however the specific parameters are not known. In order to reflect this subjective uncertainty…

Auction data often contain information on only the most competitive bids as opposed to all bids. The usual measurement error approaches to unobserved heterogeneity are inapplicable due to dependence among order statistics. We bridge this…

This paper examines a heterogeneous beliefs model in which there is a process that is only partially observed by the agents. The economy contains a risky asset producing dividends continuously in time. The dividends are observed by the…

The paper introduces benchmark-neutral pricing and hedging for long-term contingent claims. It employs the growth optimal portfolio of the stocks as numeraire and the new benchmark-neutral pricing measure for pricing. For a realistic…

In discrete time markets with proportional transaction costs, Schachermayer (2004) shows that robust no-arbitrage is equivalent to the existence of a strictly consistent price system. In this paper, we introduce the concept of prospective…