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The implementation of electricity markets based on locational marginal pricing in a multi-settlement process has allowed wholesale competition, with pricing mechanisms that incentivize the optimal allocation of generation, transmission, and…
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,…
In this paper we present a rigorously motivated pricing equation for derivatives, including general cash collateralization schemes, which is consistent with quoted market bond prices. Traditionally, there have been differences in how…
In this paper, we propose a clearing model for prices in a financial markets due to margin calls on short sold assets. In doing so, we construct an explicit formulation for the prices that would result immediately following asset purchases…
We analyze structure of the world foreign currency exchange (FX) market viewed as a network of interacting currencies. We analyze daily time series of FX data for a set of 63 currencies, including gold, silver and platinum. We group…
We introduce efficient numerical methods for generic HJM equations of interest rate theory by means of high-order weak approximation schemes. These schemes allow for QMC implementations due to the relatively low dimensional integration…
The recent "correlation breakdown" in the modeling of credit default swaps, in which model correlations had to exceed 100% in order to reproduce market prices of supersenior tranches, is analyzed and argued to be a fundamental market…
Two markets should be considered isomorphic if they are financially indistinguishable. We define a notion of isomorphism for financial markets in both discrete and continuous time. We then seek to identify the distinct isomorphism classes,…
Prediction markets show considerable promise for developing flexible mechanisms for machine learning. Here, machine learning markets for multivariate systems are defined, and a utility-based framework is established for their analysis. This…
In Decentralized Finance (DeFi), automated market makers typically implement liquidity provisioning protocols. These protocols allow third-party liquidity providers (LPs) to provide assets to facilitate trade in exchange for fees. This…
The research presented in this work is motivated by recent papers by Brigo et al. (2011), Burgard and Kjaer (2009), Cr\'epey (2012), Fujii and Takahashi (2010), Piterbarg (2010) and Pallavicini et al. (2012). Our goal is to provide a sound…
It is assumed that under suitable economic and information-theoretic conditions, market exchange rates are free from arbitrage. Commodity markets in which trades occur over a complete graph are shown to be trivial. We therefore examine the…
This paper builds on "Collective Arbitrage and the Value of Cooperation" by Biagini et al. (2025, forthcoming in "Finance and Stochastics"), which introduced in discrete time the notions of collective arbitrage and super-replication in a…
A statistical generalization is made of microeconomics in the spirit of going from classical to statistical mechanics. The price and quantity of every commodity1 traded in the market, at each instant of time, is considered to be an…
The LIBOR Market Model (LMM) is a widely used model for pricing interest rate derivatives. While the Black-Scholes model is well-known for pricing stock derivatives such as stock options, a larger portion of derivatives are based on…
We present a new model for prediction markets, in which we use risk measures to model agents and introduce a market maker to describe the trading process. This specific choice on modelling tools brings us mathematical convenience. The…
This paper is the first attempt to formalize a new field of economics; studding the Intangibles Goods available on the Internet. We are taking advantage of the digital world's specific rules, in particular the zero marginal cost, to propose…
We study a notion of good-deal hedging, that corresponds to good-deal valuation for generalized good-deal constraints. Under model uncertainty about the market prices of risk of hedging assets, a robust approach leads to a reduction or even…
In this paper, we present an alternative perspective on the mean-field LIBOR market model introduced by Desmettre et al. in arXiv:2109.10779. Our novel approach embeds the mean-field model in a classical setup, but retains the crucial…
In traditional financial markets, yield curves are widely available for countries (and, by extension, currencies), financial institutions, and large corporates. These curves are used to calibrate stochastic interest rate models, discount…