Related papers: Option spanning beyond $L_p$-models
Approximations to utility indifference prices are provided for a contingent claim in the large position size limit. Results are valid for general utility functions on the real line and semi-martingale models. It is shown that as the…
In this paper, we give a numerical method for pricing long maturity, path dependent options by using the Markov property for each underlying asset. This enables us to approximate a path dependent option by using some kinds of plain…
Put-call parity is a terminal-payoff identity, but its enforcement is capital-using. I study the carry gap, the annualized wedge between option-implied and OIS discount factors, in SPX and RUT index options. Quoted parity is tightly…
Double no-touch options, contracts which pay out a fixed amount provided an underlying asset remains within a given interval, are commonly traded, particularly in FX markets. In this work, we establish model-free bounds on the price of…
We study the optimal portfolio liquidation problem over a finite horizon in a limit order book with bid-ask spread and temporary market price impact penalizing speedy execution trades. We use a continuous-time modeling framework, but in…
The start up costs in many kinds of generators lead to complex cost structures, which in turn yield severe market loopholes in the locational marginal price (LMP) scheme. Convex hull pricing (a.k.a. extended LMP) is proposed to improve the…
We show how to price and replicate a variety of barrier-style claims written on the $\log$ price $X$ and quadratic variation $\langle X \rangle$ of a risky asset. Our framework assumes no arbitrage, frictionless markets and zero interest…
In this work we consider three problems of the standard market approach to pricing of credit index options: the definition of the index spread is not valid in general, the usually considered payoff leads to a pricing which is not always…
We propose a new non parametric technique to estimate the CALL function based on the superhedging principle. Our approach does not require absence of arbitrage and easily accommodates bid/ask spreads and other market imperfections. We prove…
In this paper we study coupled fully non-local equations, where a linear non-local operator jointly acts on the time and space variables. We establish existence and uniqueness of the solution. A maximum principle is proved and used to…
The question of pricing and hedging a given contingent claim has a unique solution in a complete market framework. When some incompleteness is introduced, the problem becomes however more difficult. Several approaches have been adopted in…
This paper formulates a model of utility for a continuous time framework that captures the decision-maker's concern with ambiguity about both volatility and drift. Corresponding extensions of some basic results in asset pricing theory are…
Given a set-valued stochastic process $(V_t)_{t=0}^T$, we say that the martingale selection problem is solvable if there exists an adapted sequence of selectors $\xi_t\in V_t$, admitting an equivalent martingale measure. The aim of this…
We use a continuous version of the standard deviation premium principle for pricing in incomplete equity markets by assuming that the investor issuing an unhedgeable derivative security requires compensation for this risk in the form of a…
In this paper we introduce a new concept for modelling electricity prices through the introduction of an unobservable intrinsic electricity price $p(\tau)$. We use it to connect the classical theory of storage with the concept of a risk…
Emphasizing the statistics of jumps crossing the strike and local time, we develop a decomposition of equity option risk premiums. Operationalizing this theoretical treatment, we equip the pricing kernel process with unspanned risks, embed…
We study arbitrage opportunities, market viability and utility maximization in market models with an insider. Assuming that an economic agent possesses from the beginning an additional information in the form of a random variable G, which…
Suppliers (including companies and individual prosumers) may wish to protect their private information when selling items they have in stock. A market is envisaged where private information can be protected through the use of differential…
This study investigates enhancing option pricing by extending the Black-Scholes model to include stochastic volatility and interest rate variability within the Partial Differential Equation (PDE). The PDE is solved using the finite…
We consider derivatives written on multiple underlyings in a one-period financial market, and we are interested in the computation of model-free upper and lower bounds for their arbitrage-free prices. We work in a completely realistic…