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We study the pricing problem for a European call option when the volatility of the underlying asset is random and follows the exponential Ornstein-Uhlenbeck model. The random diffusion model proposed is a two-dimensional market process that…
This paper considers the problem of consumption and investment in a financial market within a continuous time stochastic economy. The investor exhibits a change in the discount rate. The investment opportunities are a stock and a riskless…
We consider a piecewise deterministic Markov decision process, where the expected exponential utility of total (nonnegative) cost is to be minimized. The cost rate, transition rate and post-jump distributions are under control. The state…
People often face trade-offs between costs and benefits occurring at various points in time. The predominant discounting approach is to use the exponential form. Central to this approach is the discount rate, a unique parameter that…
We establish explicit socially optimal rules for an irreversible investment deci- sion with time-to-build and uncertainty. Assuming a price sensitive demand function with a random intercept, we provide comparative statics and economic…
This paper studies the optimal risk-averse timing to sell a risky asset. The investor's risk preference is described by the exponential, power, or log utility. Two stochastic models are considered for the asset price -- the geometric…
This paper introduces an information-based model for the pricing of storable commodities such as crude oil and natural gas. The model uses the concept of market information about future supply and demand as a basis for valuation. Physical…
We model the dynamics of asset prices and associated derivatives by consideration of the dynamics of the conditional probability density process for the value of an asset at some specified time in the future. In the case where the price…
We study a single risky financial asset model subject to price impact and transaction cost over an finite time horizon. An investor needs to execute a long position in the asset affecting the price of the asset and possibly incurring in…
We study a discrete-time consumption-based capital asset pricing model under expectations-based reference-dependent preferences. More precisely, we consider an endowment economy populated by a representative agent who derives utility from…
We study the optimal investment and proportional reinsurance problem of an insurance company, whose investment preferences are described via a forward dynamic utility of exponential type in a stochastic factor model allowing for a possible…
This paper extends the core results of discrete time infinite horizon dynamic programming to the case of state-dependent discounting. We obtain a condition on the discount factor process under which all of the standard optimality results…
In this paper, we consider a stochastic asset price model where the trend is an unobservable Ornstein Uhlenbeck process. We first review some classical results from Kalman filtering. Expectedly, the choice of the parameters is crucial to…
We consider the problem of option pricing under stochastic volatility models, focusing on the linear approximation of the two processes known as exponential Ornstein-Uhlenbeck and Stein-Stein. Indeed, we show they admit the same limit…
We consider a continuous-time linear-quadratic Gaussian control problem with partial observations and costly information acquisition. More precisely, we assume the drift of the state process to be governed by an unobservable…
Beliefs inform the behavior of forward-thinking agents in complex environments. Recently, sequential Bayesian inference has emerged as a mechanism to study belief formation among agents adapting to dynamical conditions. However, we lack…
We propose a general framework of European power option pricing under two different market assumptions about extended Vasic\v{e}k interest rate process and exponential Ornstein-Uhlenbeck asset process with continuous dividend as underlying,…
We consider the problem of designing an expected-revenue maximizing mechanism for allocating multiple non-perishable goods of $k$ varieties to flexible consumers over $T$ time steps. In our model, a random number of goods of each variety…
The purpose of the present paper is to incorporate stochastic interest rates into a matrix-approach to multi-state life insurance, where formulas for reserves, moments of future payments and equivalence premiums can be obtained as explicit…
We obtain approximation results for general positive linear operators satisfying mild conditions, when acting on discontinuous functions and absolutely continuous functions having discontinuous derivatives. The upper bounds, given in terms…