Related papers: Option pricing for Informed Traders

We consider as given a discrete time financial market with a risky asset and options written on that asset and determine both the sub- and super-hedging prices of an American option in the model independent framework of ArXiv:1305.6008. We…

Following the idea of Bayesian learning via Gaussian mixture model, we organically combine the backward-looking information contained in the historical data and the forward-looking information implied by the market portfolio, which is…

This paper gives an arbitrage-free prediction for future prices of an arbitrary co-terminal set of options with a given maturity, based on the observed time series of these option prices. The statistical analysis of such a multi-dimensional…

The estimation of asset return distributions is crucial for determining optimal trading strategies. In this paper we describe the constrained mixture model, based on a mixture of Gamma and Gaussian distributions, to provide an accurate…

In the literature there have been incompatible estimates for the amount of non-Gaussianity in hybrid inflation. In this note we point out the sources for the discrepancies and show that the results for the amount of non-Gaussianity in…

Simultaneous ascending auctions present agents with the exposure problem: bidding to acquire a bundle risks the possibility of obtaining an undesired subset of the goods. Auction theory provides little guidance for dealing with this…

We introduce a model for the dynamics of stock prices based on a non quadratic path integral. The model is a generalization of Ilinski's path integral model, more precisely we choose a different action, which can be tuned to different time…

We develop a robust framework for pricing and hedging of derivative securities in discrete-time financial markets. We consider markets with both dynamically and statically traded assets and make minimal measurability assumptions. We obtain…

We present a numerical method for the frequent pricing of financial derivatives that depends on a large number of variables. The method is based on the construction of a polynomial basis to interpolate the value function of the problem by…

Aggregating risks from multiple sources can be complex and demanding, and decision makers usually adopt heuristics to simplify the evaluation process. This paper axiomatizes two closed related and yet different heuristics, narrow bracketing…

In this paper, we propose an equilibrium pricing model in a dynamic multi-period stochastic framework with uncertain income streams. In an incomplete market, there exist two traded risky assets (e.g. stock/commodity and weather derivative)…

We consider the pricing of derivatives written on the discretely sampled realized variance of an underlying security. In the literature, the realized variance is usually approximated by its continuous-time limit, the quadratic variation of…

We investigate asymmetry of information in the context of robust approach to pricing and hedging of financial derivatives. We consider two agents, one who only observes the stock prices and another with some additional information, and…

We analyze waiting times for price changes in a foreign currency exchange rate. Recent empirical studies of high frequency financial data support that trades in financial markets do not follow a Poisson process and the waiting times between…

Using simple particle models of limit order markets, we argue that mid-term over-diffusive price behaviour is inherent to the very nature of these markets. Several rules for rate changes are considered. We obtain analytical results for…

We build a methodology that takes a given option price in the tails with strike $K$ and extends (for calls, all strikes > $K$, for puts all strikes $< K$) assuming the continuation falls into what we define as "Karamata Constant" over which…

The paper introduces a limit version of multiple stopping options such that the holder selects dynamically a weight function that control the distribution of the payments (benefits) over time. In applications for commodities and energy…

We address the information content of European option prices about volatility in terms of the Fisher information matrix. We assume that observed option prices are centred on the theoretical price provided by Heston's model disturbed by…

Contrary to the claims made by several authors, a financial market model in which the price of a risky security follows a reflected geometric Brownian motion is not arbitrage-free. In fact, such models violate even the weakest no-arbitrage…

This article is the second one in a series on the use of scaling invariance in finance. In the first article (cond-mat/9906048), we introduced a new formalism for the pricing of derivative securities, which focusses on tradable objects…