Related papers: Dynamic indifference pricing via the G-expectation
We present a general approach to the pricing of products in finance and insurance in the multi-period setting. It is a combination of the utility indifference pricing and optimal intertemporal risk allocation. We give a characterization of…
We consider the Bachelier model with information delay where investment decisions can be based only on observations from $H>0$ time units before. Utility indifference prices are studied for vanilla options and we compute their non-trivial…
In this note, we develop stock option price approximations for a model which takes both the risk o default and the stochastic volatility into account. We also let the intensity of defaults be influenced by the volatility. We show that it…
This paper studies dynamic asset allocation with interest rate risk and several sources of ambiguity. The market consists of a risk-free asset, a zero-coupon bond (both determined by a Vasicek model), and a stock. There is ambiguity about…
We model a nonlinear price curve quoted in a market as the utility indifference curve of a representative liquidity supplier. As the utility function we adopt a g-expectation. In contrast to the standard framework of financial engineering,…
People often deviate from expected utility theory when making risky and intertemporal choices. While the effects of probabilistic risk and time delay have been extensively studied in isolation, their interplay and underlying theoretical…
We consider the setting in which an electric power utility seeks to curtail its peak electricity demand by offering a fixed group of customers a uniform price for reductions in consumption relative to their predetermined baselines. The…
In the presence of ambiguity on the driving force of market randomness, we consider the dynamic portfolio choice without any predetermined investment horizon. The investment criteria is formulated as a robust forward performance process,…
In this paper we investigate the pricing problem of a pure endowment contract when the insurer has a limited information on the mortality intensity of the policyholder. The payoff of this kind of policies depends on the residual life time…
We study the dynamics of the exponential utility indifference value process C(B;\alpha) for a contingent claim B in a semimartingale model with a general continuous filtration. We prove that C(B;\alpha) is (the first component of) the…
We study a continuous-time portfolio choice problem for an investor whose state-dependent preferences are determined by an exogenous factor that evolves as an It\^o diffusion process. Since risk attitudes at the end of the investment…
Microstructure of market dynamics is studied through analysis of tick price data. Linear trend is introduced as a tool for such analysis. Trend arbitrage inequality is developed and tested. The inequality sets limiting relationship between…
It is well known that the minimal superhedging price of a contingent claim is too high for practical use. In a continuous-time model uncertainty framework, we consider a relaxed hedging criterion based on acceptable shortfall risks.…
We study the optimal design of electricity contracts among a population of consumers with different needs. This question is tackled within the framework of Principal-Agent problems in presence of adverse selection. The particular features…
An unconventional approach for optimal stopping under model ambiguity is introduced. Besides ambiguity itself, we take into account how ambiguity-averse an agent is. This inclusion of ambiguity attitude, via an $\alpha$-maxmin nonlinear…
In dynamic settings each economic agent's choices can be revealing of her private information. This elicitation via the rationalization of observable behavior depends each agent's perception of which payoff-relevant contingencies other…
Data assets are data commodities that have been processed, produced, priced, and traded based on actual demand. Reasonable pricing mechanism for data assets is essential for developing the data market and realizing their value. Most…
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…
In this paper we study mean-variance hedging under the G-expectation framework. Our analysis is carried out by exploiting the G-martingale representation theorem and the related probabilistic tools, in a contin- uous financial market with…
Recovering and distinguishing between the strict-preference, indifference and/or indecisiveness parts of a decision maker's preferences is a challenging task but also important for testing theory and conducting welfare analysis. This paper…