Related papers: Quantile hedging on markets with proportional tran…

Random shifting typically appears in credibility models whereas random scaling is often encountered in stochastic models for claim sizes reflecting the time-value property of money. In this article we discuss some aspects of random shifting…

The introduction of transaction costs into the theory of option pricing could lead not only to the change of return for options, but also to the change of the volatility. On the base of assumption of the portfolio analysis, a new equation…

We study the approximation of certain stochastic integrals with respect to a d-dimensional diffusion by corresponding stochastic integrals with piece-wise constant integrands. In finance this corresponds to replacing a continuously adjusted…

The geometric approach to financial markets with proportional transaction cost prescribes to imbed a specific model (of stock market, of currency market etc.), usually given in a parametric form, into a natural framework defined by the two…

We treat a fairly broad class of financial models which includes markets with proportional transaction costs. We consider an investor with cumulative prospect theory preferences and a non-negativity constraint on portfolio wealth. The…

This paper presents a new model for pricing financial derivatives subject to collateralization. It allows for collateral arrangements adhering to bankruptcy laws. As such, the model can back out the market price of a collateralized…

We consider a new approach to portfolio selection in presence of transaction costs which allows to map the problem into one without costs. The proposed approach connects all the quantities of interest to exit times and probabilities to…

An investor faced with a contingent claim may eliminate risk by perfect hedging, but as it is often quite expensive, he seeks partial hedging (quantile hedging or efficient hedging) that requires less capital and reduces the risk. Efficient…

We consider the mean-variance hedging problem under partial Information. The underlying asset price process follows a continuous semimartingale and strategies have to be constructed when only part of the information in the market is…

Financial global crisis has devastating impacts to economies since early XX century and continues to impose increasing collateral damages for governments, enterprises, and society in general. Up to now, all efforts to obtain efficient…

We study risk-sharing equilibria with general convex costs on the agents' trading rates. For an infinite-horizon model with linear state dynamics and exogenous volatilities, we prove that the equilibrium returns mean-revert around their…

We consider a financial model with permanent price impact. Continuous time trading dynamics are derived as the limit of discrete rebalancing policies. We then study the problem of super-hedging a European option. Our main result is the…

We revisit the well-studied superhedging problem under proportional transaction costs in continuous time using the recently developed tools of set-valued stochastic analysis. By relying on a simple Black-Scholes-type market model for…

In this paper, we consider the problem of equal risk pricing and hedging in which the fair price of an option is the price that exposes both sides of the contract to the same level of risk. Focusing for the first time on the context where…

In this paper, we investigate risk minimization problem of derivatives based on non-tradable underlyings by means of dynamic g-expectations which are slight different from conditional g-expectations. In this framework, inspired by [1] and…

We introduce polynomial processes in the sense of [8] in the context of stochastic portfolio theory to model simultaneously companies' market capitalizations and the corresponding market weights. These models substantially extend volatility…

In a fixed time horizon, appropriately executing a large amount of a particular asset -- meaning a considerable portion of the volume traded within this frame -- is challenging. Especially for illiquid or even highly liquid but also highly…

Several models for the pricing of derivative securities in illiquid markets are discussed. A typical type of nonlinear partial differential equations arising from these investigation is studied. The scaling properties of these equations are…

The work deals with the risk assessment theory. An unitary risk algorithm is elaborated. The algorithm is based on parallel curves. The basic curve of risk is a hyperbolic curve, obtained as a multiplication between the probability of…

This paper characterizes the equilibrium in a continuous time financial market populated by heterogeneous agents who differ in their rate of relative risk aversion and face convex portfolio constraints. The model is studied in an…