Related papers: Indifference Pricing and Hedging in a Multiple-Pri…
In this paper, we obtain a duality result for the exponential utility maximization problem where trading is subject to quadratic transaction costs and the investor is required to liquidate her position at the maturity date. As an…
This paper introduces a dual problem to study a continuous-time consumption and investment problem with incomplete markets and stochastic differential utility. For Epstein-Zin utility, duality between the primal and dual problems is…
We consider a discrete-time robust utility maximisation with semistatic strategies, and the associated indifference prices of exotic options. For this purpose, we introduce a robust form of convex integral functionals on the space of…
We study the problem of optimal pricing and hedging of a European option written on an illiquid asset $Z$ using a set of proxies: a liquid asset $S$, and $N$ liquid European options $P_i$, each written on a liquid asset $Y_i, i=1,N$. We…
In this paper, we consider a financial market with assets exposed to some risks inducing jumps in the asset prices, and which can still be traded after default times. We use a default-intensity modeling approach, and address in this…
In this article we develop an explicit formula for pricing European options when the underlying stock price follows a non-linear stochastic differential delay equation (sdde). We believe that the proposed model is sufficiently flexible to…
The Black-Scholes formula for pricing options on stocks and other securities has been generalized by Merton and Garman to the case when stock volatility is stochastic. The derivation of the price of a security derivative with stochastic…
In this paper we develop numerical pricing methodologies for European style Exchange Options written on a pair of correlated assets, in a market with finite liquidity. In contrast to the standard multi-asset Black-Scholes framework, trading…
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 a Markovian stochastic volatility model, we consider financial agents whose investment criteria are modelled by forward exponential performance processes. The problem of contingent claim indifference valuation is first addressed and a…
The determination of acceptability prices of contingent claims requires the choice of a stochastic model for the underlying asset price dynamics. Given this model, optimal bid and ask prices can be found by stochastic optimization. However,…
We develop from basic economic principles a continuous-time model for a large investor who trades with a finite number of market makers at their utility indifference prices. In this model, the market makers compete with their quotes for the…
Finite difference approximations to multi-asset American put option price are considered. The assets are modelled as a multi-dimensional diffusion process with variable drift and volatility. Approximation error of order one quarter with…
This research addresses accurate option pricing by employing models beyond the traditional Black-Scholes framework. While Black-Scholes provides a closed-form solution, it is limited by assumptions of constant volatility, no dividends, and…
We perform a stability analysis for the utility maximization problem in a general semimartingale model where both liquid and illiquid assets (random endowments) are present. Small misspecifications of preferences (as modeled via expected…
An investor with constant absolute risk aversion trades a risky asset with general It\^o-dynamics, in the presence of small proportional transaction costs. In this setting, we formally derive a leading-order optimal trading policy and the…
Following the foundational work of the Black--Scholes model, extensive research has been developed to price the option by addressing its underlying assumptions and associated pricing biases. This study introduces a novel framework for…
We pursue an inverse approach to utility theory and consumption & investment problems. Instead of specifying an agent's utility function and deriving her actions, we assume we observe her actions (i.e. her consumption and investment…
In a model with no given probability measure, we consider asset pricing in the presence of frictions and other imperfections and characterize the property of coherent pricing, a notion related to (but much weaker than) the no arbitrage…
In a model with no given probability measure, we consider asset pricing in the presence of frictions and other imperfections and characterize the property of coherent pricing, a notion related to (but much weaker than) the no arbitrage…