Related papers: Arbitrage, hedging and utility maximization using …
Non-equilibrium phenomena occur not only in physical world, but also in finance. In this work, stochastic relaxational dynamics (together with path integrals) is applied to option pricing theory. A recently proposed model (by Ilinski et…
We consider a general discrete-time financial market with proportional transaction costs as in [Kabanov, Stricker and R\'{a}sonyi Finance and Stochastics 7 (2003) 403--411] and [Schachermayer Math. Finance 14 (2004) 19--48]. In addition to…
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 construct an aggregator for a family of Snell envelopes in a nondominated framework. We apply this construction to establish a robust hedging duality, along with the existence of a minimal hedging strategy, in a general semi-martingale…
American options are financial instruments that can be exercised at any time before expiration. In this paper we study the problem of pricing this kind of derivatives within a framework in which some of the properties --volatility and…
In a financial market model, we consider the variance-optimal semi-static hedging of a given contingent claim, a generalization of the classic variance-optimal hedging. To obtain a tractable formula for the expected squared hedging error…
We study the hedging and valuation of European and American claims on a non-traded asset $Y$, when a traded stock $S$ is available for hedging, with $S$ and $Y$ following correlated geometric Brownian motions. This is an incomplete market,…
This paper addresses the question of how much to bid to maximize the profit when trading in two electricity markets: the hourly Day-Ahead Auction and the quarter-hourly Intraday Auction. For optimal coordinated bidding many price scenarios…
We present a numerically efficient approach for learning a risk-neutral measure for paths of simulated spot and option prices up to a finite horizon under convex transaction costs and convex trading constraints. This approach can then be…
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 studies a finite-horizon portfolio selection problem with non-concave terminal utility and proportional transaction costs, in which the commonly used concavification principle for terminal value is no longer applicable. We…
We study the optimal portfolio liquidation problem over a finite horizon in a limit order book with bid-ask spread and temporary market price impact penalizing speedy execution trades. We use a continuous-time modeling framework, but in…
The virtue of an American option is that it can be exercised at any time. This right is particularly valuable when there is model uncertainty. Yet almost all the extensive literature on American options assumes away model uncertainty. This…
We prove the superhedging duality for a discrete-time financial market with proportional transaction costs under model uncertainty. Frictions are modeled through solvency cones as in the original model of [Kabanov, Y., Hedging and…
We consider the problem of optimal bidding for virtual trading in two-settlement electricity markets. A virtual trader aims to arbitrage on the differences between day-ahead and real-time market prices; both prices, however, are random and…
We study the dual formulation of the utility maximization problem in incomplete markets when the utility function is finitely valued on the whole real line. We extend the existing results in this literature in two directions. First, we…
We consider a discrete-time model of a financial market where a risky asset is bought and sold with transactions having a transient price impact. It is shown that the corresponding utility maximization problem admits a solution. We manage…
This study deals with the problem of pricing European currency options in discrete time setting, whose prices follow the fractional Black Scholes model with transaction costs. Both the pricing formula and the fractional partial differential…
Within a common arbitrage-free semimartingale financial market we consider the problem of determining all Nash equilibrium investment strategies for $n$ agents who try to maximize the expected utility of their relative wealth. The utility…
A hypothetical risk-neutral agent who trades to maximize the expected profit of the next trade will approximately exhibit long-term optimal behavior as long as this agent uses the vector $p = \nabla V (t, x)$ as effective microstructure…