Related papers: Conditional Davis Pricing
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…
In this paper we ask whether, given a stock market and an illiquid derivative, there exists arbitrage-free prices at which an utility-maximizing agent would always want to buy the derivative, irrespectively of his own initial endowment of…
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…
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…
This paper is concerned with the study of insurance related derivatives on financial markets that are based on non-tradable underlyings, but are correlated with tradable assets. We calculate exponential utility-based indifference prices,…
We study the pricing of derivative securities in financial markets modeled by a sub-mixed fractional Brownian motion with jumps (smfBm-J), a non-Markovian process that captures both long-range dependence and jump discontinuities. Under this…
We review the utility-based valuation method for pricing derivative securities in incomplete markets. In particular, we review the practical approach to the utility-based pricing by the means of computing the first order expansion of…
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…
We consider the optimal investment and marginal utility pricing problem of a risk averse agent and quantify their exposure to a small amount of model uncertainty. Specifically, we compute explicitly the first-order sensitivity of their…
This paper formulates an utility indifference pricing model for investors trading in a discrete time financial market under non-dominated model uncertainty. The investors preferences are described by strictly increasing concave random…
A pricing principle is introduced for non-attainable $q$-exponential bounded contingent claims in an incomplete Brownian motion market setting. The buyer evaluates the contingent claim under the ``distorted Radon-Nikodym derivative'' and…
We consider a generic market model with a single stock and with random volatility. We assume that there is a number of tradable options for that stock with different strike prices. The paper states the problem of finding a pricing rule that…
This paper studies the problem of maximizing the expected utility of terminal wealth for a financial agent with an unbounded random endowment, and with a utility function which supports both positive and negative wealth. We prove the…
This paper analyzes the pricing of collateralized derivatives, i.e. contracts where counterparties are not only subject to financial derivatives cash flows but also to collateral cash flows arising from a collateral agreement. We do this…
The paper studies a non-linear transformation between Brownian martingales, which is given by the inverse of the pricing operator in the mathematical finance terminology. Subsequently, the solvability of systems of equations corresponding…
Stability of the utility maximization problem with random endowment and indifference prices is studied for a sequence of financial markets in an incomplete Brownian setting. Our novelty lies in the nonequivalence of markets, in which the…
We consider a financial market in discrete time and study pricing and hedging conditional on the information available up to an arbitrary point in time. In this conditional framework, we determine the structure of arbitrage-free prices.…
We consider so-called regular invertible Gaussian Volterra processes and derive a formula for their prediction laws. Examples of such processes include the fractional Brownian motions and the mixed fractional Brownian motions. As an…
This paper considers utility indifference valuation of derivatives under model uncertainty and trading constraints, where the utility is formulated as an additive stochastic differential utility of both intertemporal consumption and…
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…