Related papers: Pricing derivatives in Hermite markets
This paper presents a new financial market simulator that may be used as a tool in both industry and academia for research in market microstructure. It allows multiple automated traders and/or researchers to simultaneously connect to an…
In this paper we provide a quantitative analysis to the concept of arbitrage, that allows to deal with model uncertainty without imposing the no-arbitrage condition. In markets that admit ``small arbitrage", we can still make sense of the…
Theoretical models applied to option pricing should take into account the empirical characteristics of the underlying financial time series. In this paper, we show how to price basket options when assets follow a shifted log-normal process…
In this article we propose a study of market models starting from a set of axioms, as one does in the case of risk measures. We define a market model simply as a mapping from the set of adapted strategies to the set of random variables…
This paper studies an equity market of stochastic dimension, where the number of assets fluctuates over time. In such a market, we develop the fundamental theorem of asset pricing, which provides the equivalence of the following statements:…
In this article we show that the payment flow of a linear tax on trading gains from a security with a semimartingale price process can be constructed for all c\`agl\`ad and adapted trading strategies. It is characterized as the unique…
In previous works Avellaneda et al. pioneered the pricing and hedging of index options - products highly sensitive to implied volatility and correlation assumptions - with large deviations methods, assuming local volatility dynamics for all…
Rough stochastic volatility models have attracted a lot of attentions recently, in particular for the linear option pricing problem. In this paper, starting with power utilities, we propose to use a martingale distortion representation of…
We investigate the problem of pricing derivatives under a fractional stochastic volatility model. We obtain an approximate expression of the derivative price where the stochastic volatility can be composed of deterministic functions of time…
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…
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…
We consider robust pricing and hedging for options written on multiple assets given market option prices for the individual assets. The resulting problem is called the multi-marginal martingale optimal transport problem. We propose two…
Model uncertainty is a type of inevitable financial risk. Mistakes on the choice of pricing model may cause great financial losses. In this paper we investigate financial markets with mean-volatility uncertainty. Models for stock markets…
We formalize in the proof assistant Isabelle essential basic notions and results in financial mathematics. We provide generic formal definitions of concepts such as markets, portfolios, derivative products, arbitrages or fair prices, and we…
We consider derivatives written on multiple underlyings in a one-period financial market, and we are interested in the computation of model-free upper and lower bounds for their arbitrage-free prices. We work in a completely realistic…
We investigate the problem of pricing and hedging derivatives of Electricity Futures contract when the underlying asset is not available. We propose to use a cross hedging strategy based on the Futures contract covering the larger delivery…
We investigate a statistical-static hedging technique for pricing assets considered as single-step stochastic cash flows. The valuation is based on constructing in a canonical way a European style derivative on a benchmark security such…
This paper studies an optimal trading problem that incorporates the trader's market view on the terminal asset price distribution and uninformative noise embedded in the asset price dynamics. We model the underlying asset price evolution by…
We study long-term growth-optimal strategies on a simple market with linear proportional transaction costs. We show that several problems of this sort can be solved in closed form, and explicit the non-analytic dependance of optimal…
We investigate pricing-hedging duality for American options in discrete time financial models where some assets are traded dynamically and others, e.g. a family of European options, only statically. In the first part of the paper we…