Related papers: Weak Convergence of Equity Derivatives Pricing wit…
We study the pricing problem for corporate defaultable bond from the viewpoint of the investors outside the firm that could not exactly know about the information of the firm. We consider the problem for pricing of corporate defaultable…
In this paper we derive an effective equation for derivative pricing which accounts for the presence of virtual arbitrage opportunities and their elimination by the market. We model the arbitrage return by a stochastic process and find an…
We develop a finite horizon continuous time market model, where risk averse investors maximize utility from terminal wealth by dynamically investing in a risk-free money market account, a stock written on a default-free dividend process,…
In the spirit of Arrow-Debreu, we introduce a family of financial derivatives that act as primitive securities in that exotic derivatives can be approximated by their linear combinations. We call these financial derivatives signature…
The objective of this paper is to provide a comprehensive study no-arbitrage pricing of financial derivatives in the presence of funding costs, the counterparty credit risk and market frictions affecting the trading mechanism, such as…
We develop a version of the fundamental theorem of asset pricing for discrete-time markets with proportional transaction costs and model uncertainty. A robust notion of no-arbitrage of the second kind is defined and shown to be equivalent…
Prudent management of insurance investment portfolios requires competent asset pricing of fixed-income assets with time-to-event contingent cash flows, such as consumer asset-backed securities (ABS). Current market pricing techniques for…
We study dynamic hedging of counterparty risk for a portfolio of credit derivatives. Our empirically driven credit model consists of interacting default intensities which ramp up and then decay after the occurrence of credit events. Using…
We discuss the asymptotic behaviour of risk-based indifference prices of European contingent claims in discrete-time financial markets under volatility uncertainty as the number of intermediate trading periods tends to infinity. The…
We build a general model for pricing defaultable claims. In addition to the usual absence of arbitrage assumption, we assume that one defaultable asset (at least) looses value when the default occurs. We prove that under this assumption, in…
We examine weak anticipations in discrete-time and continuous-time financial markets consisting of one risk-free asset and multiple risky assets, defining a minimal probability measure associated with the anticipation that does not depend…
This paper studies the pricing of contingent claims of American style, using indifference pricing by fully dynamic convex risk measures. We provide a general definition of risk-indifference prices for buyers and sellers in continuous time,…
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…
We study the pricing of credit derivatives with asymmetric information. The managers have complete information on the value process of the firm and on the default threshold, while the investors on the market have only partial observations,…
We solve the problem of super-hedging European or Asian options for discrete-time financial market models where executable prices are uncertain. The risky asset prices are not described by single-valued processes but measurable selections…
As operators acting on the undetermined final settlement of a derivative security, expectation is linear but price is non-linear. When the market of underlying securities is incomplete, non-linearity emerges from the bid-offer around the…
We study price discovery in a model where an informed agent has arbitrary private information about state probabilities and trades state-contingent claims. The model unifies the key elements of Arrow-Debreu (1954) and Kyle (1985). When the…
Existing electricity market designs assume risk neutrality and lack risk-hedging instruments, which leads to suboptimal market outcomes and reduces the overall market efficiency. This paper enables risk-trading in the chance-constrained…
We introduce the concept of no-arbitrage in a credit risk market under ambiguity considering an intensity-based framework. We assume the default intensity is not exactly known but lies between an upper and lower bound. By means of the…
In this article, we consider a 2 factors-model for pricing defaultable bond with discrete default intensity and barrier where the 2 factors are stochastic risk free short rate process and firm value process. We assume that the default event…