Related papers: Model-free trading and hedging with continuous pri…

We consider the problem of hedging a European contingent claim in a Bachelier model with transient price impact as proposed by Almgren and Chriss. Following the approach of Rogers and Singh and Naujokat and Westray, the hedging problem can…

This article is a sequel to [A.H.M.P]. In [A.H.M.P], we develop an explicit formula for pricing European options when the underlying stock price follows a non-linear stochastic delay equation with fixed delays in the drift and diffusion…

We consider a multi-asset incomplete model of the financial market, where each of $m\geq 2$ risky assets follows the binomial dynamics, and no assumptions are made on the joint distribution of the risky asset price processes. We provide…

We apply the concepts of utility based pricing and hedging of derivatives in stochastic volatility markets and introduce a new class of "reciprocal affine" models for which the indifference price and optimal hedge portfolio for pure…

The pricing of options, warrants and other derivative securities is one of the great success of financial economics. These financial products can be modeled and simulated using quantum mechanical instruments based on a Hamiltonian…

Foundation models - already transformative in domains such as natural language processing - are now starting to emerge for time-series tasks in finance. While these pretrained architectures promise versatile predictive signals, little is…

Strict local martingales may admit arbitrage opportunities with respect to the class of simple trading strategies. (Since there is no possibility of using doubling strategies in this framework, the losses are not assumed to be bounded from…

This paper formulates a model of utility for a continuous time framework that captures the decision-maker's concern with ambiguity about both volatility and drift. Corresponding extensions of some basic results in asset pricing theory are…

We present a tractable non-independent increment process which provides a high modeling flexibility. The process lies on an extension of the so-called Harris chains to continuous time being stationary and Feller. We exhibit constructions,…

An agent-based modelling methodology for the joint price evolution of two stocks is put forward. The method models future multidimensional price trajectories reflecting how a class of agents rebalance their portfolios in an operational way…

Conic martingales refer to Brownian martingales evolving between bounds. Among other potential applications, they have been suggested for the sake of modeling conditional survival probabilities under partial information, as usual in…

We present a perturbation theory of the market impact based on an extension of the framework proposed by [Loeper, 2018] -- originally based on [Liu and Yong, 2005] -- in which we consider only local linear market impact. We study the…

We study a novel pricing operator for complete, local martingale models. The new pricing operator guarantees put-call parity to hold for model prices and the value of a forward contract to match the buy-and-hold strategy, even if the…

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…

We study a quadratic hedging problem for a sequence of contingent claims with random weights in discrete time. We obtain the optimal hedging strategy explicitly in a recursive representation, without imposing the non-degeneracy (ND)…

This paper presents an axiomatic scheme for interest rate models in discrete time. We take a pricing kernel approach, which builds in the arbitrage-free property and provides a link to equilibrium economics. We require that the pricing…

For several decades, the no-arbitrage (NA) condition and the martingale measures have played a major role in the financial asset's pricing theory. We propose a new approach for estimating the super-replication cost based on convex duality…

We consider asset price models whose dynamics are described by linear functions of the (time extended) signature of a primary underlying process, which can range from a (market-inferred) Brownian motion to a general multidimensional…

This paper describes a flexible and tractable bottom-up dynamic correlation modelling framework with a consistent stochastic recovery specification. The stochastic recovery specification only models the first two moments of the spot…

We show that the results of ArXiv:1305.6008 on the Fundamental Theorem of Asset Pricing and the super-hedging theorem can be extended to the case in which the options available for static hedging (\emph{hedging options}) are quoted with…