Related papers: Super-Replication with Fixed Transaction Costs
An investor's risk aversion is assumed to tend to infinity. In a fairly general setting, we present conditions ensuring that the respective utility indifference prices of a given contingent claim converge to its super replication price.
Consider a financial market in which an agent trades with utility-induced restrictions on wealth. For a utility function which satisfies the condition of reasonable asymptotic elasticity at $-\infty$ we prove that the utility-based…
We consider a model of linear market impact, and address the problem of replicating a contingent claim in this framework. We derive a non-linear Black-Scholes Equation that provides an exact replication strategy. This equation is fully…
As a firm varies the price of a product, consumers exhibit reference effects, making purchase decisions based not only on the prevailing price but also the product's price history. We consider the problem of learning such behavioral…
When uncertainty is modelled by a set of non-dominated and non-compact probability measures, a notion of essential supremum for a family of real-valued functions is developed in terms of upper semi-analytic functions. We show how the…
This paper presents a method for forecasting limit order book durations using a self-exciting flexible residual point process. High-frequency events in modern exchanges exhibit heavy-tailed interarrival times, posing a significant challenge…
The classical discrete time model of proportional transaction costs relies on the assumption that a feasible portfolio process has solvent increments at each step. We extend this setting in two directions, allowing for convex transaction…
In a market with transaction costs, the price of a derivative can be expressed in terms of (preconsistent) price systems (after Kusuoka (1995)). In this paper, we consider a market with binomial model for stock price and discuss how to…
This article analytically characterizes the impermanent loss of concentrated liquidity provision for automatic market makers in decentralised markets such as Uniswap. We propose two static replication formulas for the impermanent loss by a…
We study overpricing in a repeated game between two representative agents: a market maker, who controls market liquidity, and a market taker, who chooses trade quantities. Market prices evolve through the endogenous price impact of trades…
Bidding in real-time auctions can be a difficult stochastic control task; especially if underdelivery incurs strong penalties and the market is very uncertain. Most current works and implementations focus on optimally delivering a campaign…
We consider the problem of fair pricing and hedging under small perturbations of the num\'eraire. We show that for replicable claims, the change of num\'eraire affects neither the fair price nor the hedging strategy. For non-replicable…
Prices of tradables can only be expressed relative to each other at any instant of time. This fundamental fact should therefore also hold for contigent claims, i.e. tradable instruments, whose prices depend on the prices of other tradables.…
This paper consists of two parts. In the first part we prove the fundamental theorem of asset pricing under short sales prohibitions in continuous-time financial models where asset prices are driven by nonnegative, locally bounded…
This paper aims to provide a simple modelling of speculative bubbles and derive some quantitative properties of its dynamical evolution. Starting from a description of individual speculative behaviours, we build and study a second order…
American options are studied in a general discrete market in the presence of proportional transaction costs, modelled as bid-ask spreads. Pricing algorithms and constructions of hedging strategies, stopping times and martingale…
Trading frictions are stochastic. They are, moreover, in many instances fast-mean reverting. Here, we study how to optimally trade in a market with stochastic price impact and study approximations to the resulting optimal control problem…
We study superhedging of contingent claims with physical delivery in a discrete-time market model with convex transaction costs. Our model extends Kabanov's currency market model by allowing for nonlinear illiquidity effects. We show that…
In speculative markets, risk-free profit opportunities are eliminated by traders exploiting them. Markets are therefore often described as "informationally efficient", rapidly removing predictable price changes, and leaving only residual…
We find empirically a characteristic sharp peak-flat trough pattern in a large set of commodity prices. We argue that the sharp peak structure reflects an endogenous inter-market organization, and that peaks may be seen as local…