Related papers: Indifference Pricing and Hedging in a Multiple-Pri…
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 consider the problem of pricing derivatives written on some industrial loss index via utility indifference pricing. The industrial loss index is modelled by a compound Poisson process and the insurer can adjust her portfolio by choosing…
We consider the computation of model-free bounds for multi-asset options in a setting that combines dependence uncertainty with additional information on the dependence structure. More specifically, we consider the setting where the…
We construct an utility-based dynamic asset pricing model for a limit order market. The price is nonlinear in volume and subject to market impact. We solve an optimal hedging problem under the market impact and derive the dynamics of the…
We consider utility maximization problem for semi-martingale models depending on a random factor $\xi$. We reduce initial maximization problem to the conditional one, given $\xi=u$, which we solve using dual approach. For HARA utilities we…
Income- and price-elasticity of demand quantify the responsiveness of markets to changes in income, and in prices, respectively. Under the assumptions of utility maximization and preference-independence (additive preferences), mathematical…
Financial markets based on L\'evy processes are typically incomplete and option prices depend on risk attitudes of individual agents. In this context, the notion of utility indifference price has gained popularity in the academic circles.…
Proof that under simple assumptions, such as constraints of Put-Call Parity, the probability measure for the valuation of a European option has the mean derived from the forward price which can, but does not have to be the risk-neutral one,…
We study the problem of maximising terminal utility for an agent facing model uncertainty, in a frictionless discrete-time market with one safe asset and finitely many risky assets. We show that an optimal investment strategy exists if the…
Model uncertainty is a type of inevitable financial risk. Mistakes on the choice of pricing model may cause great financial losses. In this paper we investigate financial markets with mean-volatility uncertainty. Models for stock markets…
We consider an agent who has access to a financial market, including derivative contracts, who looks to maximise her utility. Whilst the agent looks to maximise utility over one probability measure, or class of probability measures, she…
We consider the pricing of derivatives in a setting with trading restrictions, but without any probabilistic assumptions on the underlying model, in discrete and continuous time. In particular, we assume that European put or call options…
We study the valuation and hedging problem of European options in a market subject to liquidity shocks. Working within a Markovian regime-switching setting, we model illiquidity as the inability to trade. To isolate the impact of such…
We present an approach for pricing European call options in presence of proportional transaction costs, when the stock price follows a general exponential L\'{e}vy process. The model is a generalization of the celebrated work of Davis,…
This paper considers exponential utility indifference pricing for a multidimensional non-traded assets model, and provides two linear approximations for the utility indifference price. The key tool is a probabilistic representation for the…
We propose a probabilistic framework for pricing derivatives, which acknowledges that information and beliefs are subjective. Market prices can be translated into implied probabilities. In particular, futures imply returns for these implied…
We study utility indifference prices and optimal purchasing quantities for a contingent claim, in an incomplete semi-martingale market, in the presence of vanishing hedging errors and/or risk aversion. Assuming that the average indifference…
We analyze the relative price change of assets starting from basic supply/demand considerations subject to arbitrary motivations. The resulting stochastic differential equation has coefficients that are functions of supply and demand. We…
We discuss utility based pricing and hedging of jump diffusion processes with emphasis on the practical applicability of the framework. We point out two difficulties that seem to limit this applicability, namely drift dependence and…
Neural networks with sufficiently smooth activation functions can approximate values and derivatives of any smooth function, and they are differentiable themselves. We improve the approximation capability of neural networks by utilizing the…