Related papers: Robust framework for quantifying the value of info…
We construct an utility-based dynamic asset pricing model for a limit order market. The price is nonlinear in volume and subject to market impact. We solve an optimal hedging problem under the market impact and derive the dynamics of the…
We examine two types of binary betting markets, whose primary goal is for profit (such as sports gambling) or to gain information (such as prediction markets). We articulate the interplay between belief and price-setting to analyse both…
The deployment of autonomous AI agents in derivatives markets has widened a practical gap between static model calibration and realized hedging outcomes. We introduce two reinforcement learning frameworks, a novel Replication Learning of…
We propose a model to study the effects of delayed information on option pricing. We first talk about the absence of arbitrage in our model, and then discuss super replication with delayed information in a binomial model, notably, we…
In the context of a general semimartingale model of a complete market, we aim at answering the following question: How much is an investor willing to pay for learning some inside information that allows to achieve arbitrage? If such a value…
In a unified framework we study equilibrium in the presence of an insider having information on the signal of the firm value, which is naturally connected to the fundamental price of the firm related asset. The fundamental value itself is…
We propose a simple and general framework for nonparametric estimation of heterogeneous treatment effects under fairness constraints. Under standard regularity conditions, we show that the resulting estimators possess the double robustness…
An agent-based model for financial markets has to incorporate two aspects: decision making and price formation. We introduce a simple decision model and consider its implications in two different pricing schemes. First, we study its…
Two agents trade an item in a simultaneous offer setting, where the exchange takes place if and only if the buyer's bid price weakly exceeds the seller's ask price. Each agent is randomly assigned the buyer or seller role. Both agents are…
In incomplete financial markets, pricing and hedging European options lack a unique no-arbitrage solution due to unhedgeable risks. This paper introduces a constrained deep learning approach to determine option prices and hedging strategies…
Robust optimization is a popular paradigm for modeling and solving two- and multi-stage decision-making problems affected by uncertainty. In many real-world applications, the time of information discovery is decision-dependent and the…
We consider a novel pricing and advertising framework, where a seller not only sets product price but also designs flexible 'advertising schemes' to influence customers' valuation of the product. We impose no structural restriction on the…
The hidden-action model captures a fundamental problem of principal-agent theory and provides an optimal sharing rule when only the outcome but not the effort can be observed. However, the hidden-action model builds on various explicit and…
We present a perturbation theory of the market impact based on an extension of the framework proposed by [Loeper, 2018] -- originally based on [Liu and Yong, 2005] -- in which we consider only local linear market impact. We study the…
We introduce the notions of Collective Arbitrage and of Collective Super-replication in a discrete-time setting where agents are investing in their markets and are allowed to cooperate through exchanges. We accordingly establish versions of…
We study the range of prices at which a rational agent should contemplate transacting a financial contract outside a given securities market. Trading is subject to nonproportional transaction costs and portfolio constraints and full…
Suppose an investor aims at Delta hedging a European contingent claim $h(S(T))$ in a jump-diffusion model, but incorrectly specifies the stock price's volatility and jump sensitivity, so that any hedging strategy is calculated under a…
The determination of acceptability prices of contingent claims requires the choice of a stochastic model for the underlying asset price dynamics. Given this model, optimal bid and ask prices can be found by stochastic optimization. However,…
Incentive design deals with interaction between a principal and an agent where the former can shape the latter's utility through a policy commitment. It is well known that the principal faces an information rent when dealing with an agent…
We introduce a setup of model uncertainty in discrete time. In this setup we derive dual expressions for the super--replication prices of game options with upper semicontinuous payoffs. We show that the super--replication price is equal to…