Related papers: Option spanning beyond $L_p$-models
Reliability Options are capacity remuneration mechanisms aimed at enhancing security of supply in electricity systems. They can be framed as call options on electricity sold by power producers to System Operators. This paper provides a…
This article considers the pricing and hedging of a call option when liquidity matters, that is, either for a large nominal or for an illiquid underlying asset. In practice, as opposed to the classical assumptions of a price-taking agent in…
In this paper we extend the theory of option pricing to take into account and explain the empirical evidence for asset prices such as non-Gaussian returns, long-range dependence, volatility clustering, non-Gaussian copula dependence, as…
We study the Option pricing with linear investment strategy based on discrete time trading of the underlying security, which unlike the existing continuous trading models provides a feasible real market implementation. Closed form formulas…
We develop a model for indifference pricing in derivatives markets where price quotes have bid-ask spreads and finite quantities. The model quantifies the dependence of the prices and hedging portfolios on an investor's beliefs, risk…
We consider an incomplete multi-asset binomial market model. We prove that for a wide class of contingent claims the extremal multi-step martingale measure is a power of the corresponding single-step extremal martingale measure. This allows…
We study the upper hedging price for contingent claims in market models with strong types of arbitrage: increasing profit, strong arbitrage, and arbitrage of the first kind. The existence of arbitrage may make the price smaller than if it…
Financial contracts with options that allow the holder to extend the contract maturity by paying an additional fixed amount found many applications in finance. Closed-form solutions for the price of these options have appeared in the…
The paper studies sub and super-replication price bounds for contingent claims defined on general trajectory based market models. No prior probabilistic or topological assumptions are placed on the trajectory space, trading is assumed to…
One of the shortcomings of the Black and Scholes model on option pricing is the assumption that trading of the underlying asset does not affect the price of that asset. This assumption can be fulfilled only in perfectly liquid markets.…
We consider robust pricing and hedging for options written on multiple assets given market option prices for the individual assets. The resulting problem is called the multi-marginal martingale optimal transport problem. We propose two…
The paper develops general, discrete, non-probabilistic market models and minmax price bounds leading to price intervals for European options. The approach provides the trajectory based analogue of martingale-like properties as well as a…
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…
We show that the results of ArXiv:1305.6008 on the Fundamental Theorem of Asset Pricing and the super-hedging theorem can be extended to the case in which the options available for static hedging (\emph{hedging options}) are quoted with…
This paper considers the pricing of long-term options on assets such as housing, where either government intervention or the economic nature of the asset is assumed to limit large falls in prices. The observed asset price is modelled by a…
We model the logarithm of the price (log-price) of a financial asset as a random variable obtained by projecting an operator stable random vector with a scaling index matrix $\underline{\underline{E}}$ onto a non-random vector. The scaling…
Financial options are contracts that specify the right to buy or sell an underlying asset at a strike price by an expiration date. Standard exchanges offer options of predetermined strike values and trade options of different strikes…
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 provide analytical tools for pricing power options with exotic features (capped or log payoffs, gap options ...) in the framework of exponential L\'evy models driven by one-sided stable or tempered stable processes. Pricing formulas take…
We consider as given a discrete time financial market with a risky asset and options written on that asset and determine both the sub- and super-hedging prices of an American option in the model independent framework of ArXiv:1305.6008. We…