Related papers: Pricing index options by static hedging under fini…
This paper studies the optimal investment problem with random endowment in an inventory-based price impact model with competitive market makers. Our goal is to analyze how price impact affects optimal policies, as well as both pricing rules…
In a model with no given probability measure, we consider asset pricing in the presence of frictions and other imperfections and characterize the property of coherent pricing, a notion related to (but much weaker than) the no arbitrage…
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.…
In this paper, we investigate risk minimization problem of derivatives based on non-tradable underlyings by means of dynamic g-expectations which are slight different from conditional g-expectations. In this framework, inspired by [1] and…
Recently, there is growing interest and need for dynamic pricing algorithms, especially, in the field of online marketplaces by offering smart pricing options for big online stores. We present an approach to adjust prices based on the…
We study robust notions of good-deal hedging and valuation under combined uncertainty about the drifts and volatilities of asset prices. Good-deal bounds are determined by a subset of risk-neutral pricing measures such that not only…
We present a stochastic local volatility model for derivative contracts on commodity futures. The aim of the model is to be able to recover the prices of derivative claims both on futures contracts and on indices on futures strategies.…
We provide a Fundamental Theorem of Asset Pricing and a Superhedging Theorem for a model independent discrete time financial market with proportional transaction costs. We consider a probability-free version of the Robust No Arbitrage…
We present an approach for pricing European call options in presence of proportional transaction costs, when the stock price follows a general exponential L\'{e}vy process. The model is a generalization of the celebrated work of Davis,…
This paper investigates the pricing and hedging of variance swaps under a $3/2$ volatility model. Explicit pricing and hedging formulas of variance swaps are obtained under the benchmark approach, which only requires the existence of the…
We determine the variance-optimal hedge when the logarithm of the underlying price follows a process with stationary independent increments in discrete or continuous time. Although the general solution to this problem is known as backward…
Modelling joint dynamics of liquid vanilla options is crucial for arbitrage-free pricing of illiquid derivatives and managing risks of option trade books. This paper develops a nonparametric model for the European options book respecting…
Based on forward curves modelled as Hilbert-space valued processes, we analyse the pricing of various options relevant in energy markets. In particular, we connect empirical evidence about energy forward prices known from the literature to…
We study utility indifference prices and optimal purchasing quantities for a non-traded contingent claim in an incomplete semi-martingale market with vanishing hedging errors. We make connections with the theory of large deviations. We…
We study the Option pricing with linear investment strategy based on discrete time trading of the underlying security, which unlike the existing continuous trading models provides a feasible real market implementation. Closed form formulas…
This paper mainly discusses the American option's hedging strategies via binomialmodel and the basic idea of pricing and hedging American option. Although the essential scheme of hedging is almost the same as European option, small…
We consider option pricing using a discrete-time Markov switching stochastic volatility with co-jump model, which can model volatility clustering and varying mean-reversion speeds of volatility. For pricing European options, we develop a…
We model a nonlinear price curve quoted in a market as the utility indifference curve of a representative liquidity supplier. As the utility function we adopt a g-expectation. In contrast to the standard framework of financial engineering,…
We study a financial model with a non-trivial price impact effect. In this model we consider the interaction of a large investor trading in an illiquid security, and a market maker who is quoting prices for this security. We assume that the…
The literature on volatility modelling and option pricing is a large and diverse area due to its importance and applications. This paper provides a review of the most significant volatility models and option pricing methods, beginning with…