Related papers: Conditional Davis Pricing
We consider a problem of optimal investment with intermediate consumption and random endowment in an incomplete semimartingale model of a financial market. We establish the key assertions of the utility maximization theory assuming that…
This study deals with the problem of pricing compound options when the underlying asset follows a mixed fractional Brownian motion with jumps. An analytic formula for compound options is derived under the risk neutral measure. Then, these…
In this paper we extend discrete time semi-static trading strategies by also allowing for dynamic trading in a finite amount of options, and we study the consequences for the model-independent super-replication prices of exotic derivatives.…
A common assumption in financial engineering is that the market price for any derivative coincides with an objectively defined risk-neutral price - a plausible assumption only if traders collectively possess objective knowledge about the…
We study the optimal investment problem for a continuous time incomplete market model such that the risk-free rate, the appreciation rates and the volatility of the stocks are all random; they are assumed to be independent from the driving…
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…
Continuous time models in the theory of real options give explicit formulas for optimal exercise strategies when options are simple and the price of an underlying asset follows a geometric Brownian motion. This paper suggests a general,…
This paper does not suppose a priori that the evolution of the price of a financial asset is a semimartingale. Since possible strategies of investors are self-financing, previous prices are forced to be finite quadratic variation processes.…
We generalize Merton's asset valuation approach to systems of multiple financial firms where cross-ownership of equities and liabilities is present. The liabilities, which may include debts and derivatives, can be of differing seniority. We…
We derive the general formulae for the the scalar and tensor spectral tilts to the second order for the inflationary models with non-minimally derivative coupling without taking the high friction limit. The non-minimally kinetic coupling to…
This paper defines fractional Heston-type (fHt) model as an arbitrage-free financial market model with the infinitesimal return volatility described by the square of a single stochastic equation with respect to fractional Brownian motion…
Diffusion processes driven by Fractional Brownian motion (FBM) have often been considered in modeling stock price dynamics in order to capture the long range dependence of stock price observed in reality. Option prices for such models had…
In this paper, we consider a num\'eraire-based utility maximization problem under constant proportional transaction costs and random endowment. Assuming that the agent cannot short sell assets and is endowed with a strictly positive…
We consider a discrete-time model of a financial market where a risky asset is bought and sold with transactions having a transient price impact. It is shown that the corresponding utility maximization problem admits a solution. We manage…
In an incomplete Brownian-motion market setting, we propose a convex monotonic pricing functional for nonattainable bounded contingent claims which is compatible with prices for attainable claims. The pricing functional is defined as the…
This paper considers the pricing of long-term options on assets such as housing, where either government intervention or the economic nature of the asset is assumed to limit large falls in prices. The observed asset price is modelled by a…
While absence of arbitrage in frictionless financial markets requires price processes to be semimartingales, non-semimartingales can be used to model prices in an arbitrage-free way, if proportional transaction costs are taken into account.…
We consider a general local-stochastic volatility model and an investor with exponential utility. For a European-style contingent claim, whose payoff may depend on either a traded or non-traded asset, we derive an explicit approximation for…
In this paper, a general framework is developed for continuous-time financial market models defined from simple strategies through conditional topologies that avoid stochastic calculus and do not necessitate semimartingale models. We then…
Given the univariate marginals of a real-valued, continuous-time martingale, (respectively, a family of measures parameterised by $t \in [0,T]$ which is increasing in convex order, or a double continuum of call prices) we construct a family…