Related papers: Dynamic indifference pricing via the G-expectation
We consider option pricing using replicating binomial trees, with a two fold purpose. The first is to introduce ESG valuation into option pricing. We explore this in a number of scenarios, including enhancement of yield due to trader…
Utility preference robust optimization (PRO) has recently been proposed to deal with optimal decision making problems where the decision maker's (DM) preference over gains and losses is ambiguous. In this paper, we take a step further to…
Accurate prediction of electricity prices plays an essential role in the electricity market. To reflect the uncertainty of electricity prices, price intervals are predicted. This paper proposes a novel prediction interval construction…
We consider infinite dimensional optimization problems motivated by the financial model called Arbitrage Pricing Theory. Using probabilistic and functional analytic tools, we provide a dual characterization of the super-replication cost.…
This paper investigates a novel behavioral feature of recursive preferences: aversion to risks that persist over time, or simply \textit{correlation aversion}. Greater persistence provides information about future consumption but reduces…
This paper studies robust forward investment and consumption preferences and optimal strategies for a risk-averse and ambiguity-averse agent in an incomplete financial market with drift and volatility uncertainties. We focus on non-zero…
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 this paper we present a theoretical framework for studying coherent acceptability indices in a dynamic setup. We study dynamic coherent acceptability indices and dynamic coherent risk measures, and we establish a duality between them. We…
In dynamic mechanism design literature, one critical aspect has been typically ignored-the agents' periodic participation, which they can adapt and plan strategically. We propose a framework for dynamic principal-multiagent problems,…
We consider the problem of dynamic pricing with limited supply. A seller has $k$ identical items for sale and is facing $n$ potential buyers ("agents") that are arriving sequentially. Each agent is interested in buying one item. Each…
Complexity of the problem of choosing among uncertain acts is a salient feature of many of the environments in which departures from expected utility theory are observed. I propose and axiomatize a model of choice under uncertainty in which…
Agent-based models provide a constructive approach to studying emergent dynamics in life-like systems composed of interacting, adaptive agents. Financial markets serve as a canonical example of such systems, where collective price dynamics…
Alignment with human preferences is commonly framed using a universal reward function, even though human preferences are inherently heterogeneous. We formalize this heterogeneity by introducing user types and examine the limits of the…
This article considers the pricing and hedging of a call option when liquidity matters, that is, either for a large nominal or for an illiquid underlying asset. In practice, as opposed to the classical assumptions of a price-taking agent in…
Difference-in-differences is a common method for estimating treatment effects, and the parallel trends condition is its main identifying assumption: the trend in mean untreated outcomes is independent of the observed treatment status. In…
We study the power and limitations of posted prices in multi-unit markets, where agents arrive sequentially in an arbitrary order. We prove upper and lower bounds on the largest fraction of the optimal social welfare that can be guaranteed…
We introduce an equilibrium asset pricing model, which we build on the relationship between a novel risk measure, the Expected Downside Risk (EDR) and the expected return. On the one hand, our proposed risk measure uses a nonparametric…
By embedding uncertainty into time, we obtain a conjoint axiomatic characterization of both Exponential Discounting and Subjective Expected Utility that accommodates arbitrary state and outcome spaces. In doing so, we provide a novel and…
We present an approach to the dynamic valuation of exposure risks in the multi-period setting, which incorporates a dynamic and multiple diversification of risks in Pareto optimal sense. This approach extends classical indifference premium…
Unexpected advertising items in sponsored search may reduce users' reliance on organic search, resulting in hidden cost for the e-commerce platform. To address this problem and promote sustainable growth, we propose a dynamic reserve price…