Related papers: Market Delay and G-expectations
The target of this paper is to establish the bid-ask pricing frame work for the American contingent claims against risky assets with G-asset price systems (see \cite{Chen2013b}) on the financial market under Knight uncertainty. First, we…
The existing work on the distributed training of machine learning (ML) models has consistently overlooked the distribution of the achieved learning quality, focusing instead on its average value. This leads to a poor dependability}of the…
This paper presents a new model for options pricing. The Black-Scholes-Merton (BSM) model plays an important role in financial options pricing. However, the BSM model assumes that the risk-free interest rate, volatility, and equity premium…
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…
The purpose of this note is to reconcile two different results concerning the model-free upper bound on the price of an American option, given a set of European option prices. Neuberger (2007, `Bounds on the American option') and Hobson and…
The classical linear Black--Scholes model for pricing derivative securities is a popular model in financial industry. It relies on several restrictive assumptions such as completeness, and frictionless of the market as well as the…
A new theory for pricing options of a stock is presented. It is based on the assumption that while successive variations in return are uncorrelated, the frequency with which a stock is traded depends on the value of the return. The solution…
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.
Approximations to utility indifference prices are provided for a contingent claim in the large position size limit. Results are valid for general utility functions on the real line and semi-martingale models. It is shown that as the…
Prediction markets are often described as mechanisms that ``aggregate information'' into prices, yet the mapping from dispersed private information to observed market histories is typically noisy, endogenous, and shaped by heterogeneous and…
In this paper, we study a type of reflected BSDE with a constraint and introduce a new kind of nonlinear expectation via BSDE with a constraint and prove the Doob-Meyer decomposition with respect to the super(sub)martingale introduced by…
Option pricing is an integral part of modern financial risk management. The well-known Black and Scholes (1973) formula is commonly used for this purpose. This paper is an attempt to extend their work to a situation in which the…
In this article we study the convergence of a European lookback option with floating strike evaluated with the binomial model of Cox-Ross-Rubinstein to its evaluation with the Black-Scholes model. We do the same for its delta. We confirm…
The key objective of this paper is to develop an empirical model for pricing SPX options that can be simulated over future paths of the SPX. To accomplish this, we formulate and rigorously evaluate several statistical models, including…
This paper builds on "Collective Arbitrage and the Value of Cooperation" by Biagini et al. (2025, forthcoming in "Finance and Stochastics"), which introduced in discrete time the notions of collective arbitrage and super-replication in a…
We consider the problem of pricing perpetual American options written on dividend-paying assets whose price dynamics follow a multidimensional Black and Scholes model. For convex Lipschitz continuous reward functions, we give a…
In this paper we study the pricing and hedging of nonreplicable contingent claims, such as long-term insurance contracts like variable annuities. Our approach is based on the benchmark-neutral pricing framework of Platen (2024), which…
This article analytically characterizes the impermanent loss for automatic market makers in decentralized exchanges such as Uniswap or Balancer (CPMM). We present a theoretical static replication formula for the pool value using a…
Large language models (LLMs) have achieved remarkable performance but face critical challenges: hallucinations and high inference costs. Leveraging multiple experts offers a solution: deferring uncertain inputs to more capable experts…
Using spectral decomposition techniques and singular perturbation theory, we develop a systematic method to approximate the prices of a variety of options in a fast mean-reverting stochastic volatility setting. Four examples are provided in…