Related papers: Conditional Davis Pricing
The non-gaussianity of processes observed in financial markets and relatively good performance of gaussian models can be reconciled by replacing the Brownian motion with Levy processes whose Levy densities decay as exp(-lambda|x|) or…
A market with asymmetric information can be viewed as a repeated exchange game between the informed sector and the uninformed one. In a market with risk-neutral agents, De Meyer [2010] proves that the price process should be a particular…
In this paper we propose an extension of the Merton model. We apply the subdiffusive mechanism to analyze equity warrant in a fractional Brownian motion environment, when the short rate follows the subdiffusive fractional Black-Scholes…
In an incomplete continuous-time securities market with uncertainty generated by Brownian motions, we derive closed-form solutions for the equilibrium interest rate and market price of risk processes. The economy has a finite number of…
A financial market model where agents trade using realistic combinations of buy-and-hold strategies is considered. Minimal assumptions are made on the discounted asset-price process - in particular, the semimartingale property is not…
We consider plain vanilla European options written on an underlying asset that follows a continuous time semi-Markov multiplicative process. We derive a formula and a renewal type equation for the martingale option price. In the case in…
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.…
In this paper we analyse financial implications of exchangeability and similar properties of finite dimensional random vectors. We show how these properties are reflected in prices of some basket options in view of the well-known put-call…
We consider utility maximization problem for semi-martingale models depending on a random factor $\xi$. We reduce initial maximization problem to the conditional one, given $\xi=u$, which we solve using dual approach. For HARA utilities we…
We investigate the valuation of the bid and ask prices for European option under the mixed fractional Brownian motion environment in the presence of superimposed jumps by an independent Poisson process.
We explore the observational implications of models of intermediate inflation driven by modified dispersion relations, specifically those representing the phenomenon of dimensional reduction in the ultraviolet limit. These models are…
We consider the problem of exponential utility indifference valuation under the simplified framework where traded and nontraded assets are uncorrelated but where the claim to be priced possibly depends on both. Traded asset prices follow a…
We construct models for the pricing and risk management of inflation-linked derivatives. The models are rational in the sense that linear payoffs written on the consumer price index have prices that are rational functions of the state…
We consider the unit-demand envy-free pricing problem, which is a unit-demand auction where each bidder receives an item that maximizes his utility, and the goal is to maximize the auctioneer's profit. This problem is NP-hard and unlikely…
We consider the robust utility maximization using a static holding in derivatives and a dynamic holding in the stock. There is no fixed model for the price of the stock but we consider a set of probability measures (models) which are not…
We develop a version of the fundamental theorem of asset pricing for discrete-time markets with proportional transaction costs and model uncertainty. A robust notion of no-arbitrage of the second kind is defined and shown to be equivalent…
We solve the problem of super-hedging European or Asian options for discrete-time financial market models where executable prices are uncertain. The risky asset prices are not described by single-valued processes but measurable selections…
We introduce a new stochastic duration model for transaction times in asset markets. We argue that widely accepted rules for aggregating seemingly related trades mislead inference pertaining to durations between unrelated trades: while any…
We consider option pricing using replicating binomial trees, with a two fold purpose. The first is to introduce ESG valuation into option pricing. We explore this in a number of scenarios, including enhancement of yield due to trader…
High frequency data in finance have led to a deeper understanding on probability distributions of market prices. Several facts seem to be well stablished by empirical evidence. Specifically, probability distributions have the following…