Related papers: Scaling Limits for Super--replication with Transie…
Recursive max-linear vectors model causal dependence between its components by expressing each node variable as a max-linear function of its parental nodes in a directed acyclic graph and some exogenous innovation. Motivated by extreme…
We determine an explicit formula for the Laplace transform of the price of an option on a maximal interest rate when the instantaneous rate satisfies Cox-Ingersoll-Ross's model. This generalizes considerably one result of Leblanc-Scaillet.
We study shortfall risk minimization for American options with path dependent payoffs under proportional transaction costs in the Black--Scholes (BS) model. We show that for this case the shortfall risk is a limit of similar terms in an…
We consider the pricing and hedging of exotic options in a model-independent set-up using \emph{shortfall risk and quantiles}. We assume that the marginal distributions at certain times are given. This is tantamount to calibrating the model…
This paper deals with the super-replication of non path-dependent European claims under additional convex constraints on the number of shares held in the portfolio. The corresponding super-replication price of a given claim has been widely…
We consider the (discrete) parabolic Anderson model $\partial u(t,x)/\partial t=\Delta u(t,x) +\xi_t(x) u(t,x)$, $t\geq 0$, $x\in \mathbb{Z}^d$, where the $\xi$-field is $\mathbb{R}$-valued and plays the role of a dynamic random…
In a seminal paper in 1973, Black and Scholes argued how expected distributions of stock prices can be used to price options. Their model assumed a directed random motion for the returns and consequently a lognormal distribution of asset…
Perpetual American options are financial instruments that can be readily exercised and do not mature. In this paper we study in detail the problem of pricing this kind of derivatives, for the most popular flavour, within a framework in…
In the present paper we construct stock price processes with the same marginal log-normal law as that of a geometric Brownian motion and also with the same transition density (and returns' distributions) between any two instants in a given…
The $\lambda$-biased random walk on a binary tree of depth $n$ is the continuous-time Markov chain that has unit mean holding times and, when at a vertex other than the root or a leaf of the tree in question, has a probability of jumping to…
Slot and van Emde Boas' weak invariance thesis states that reasonable machines can simulate each other within a polynomially overhead in time. Is $\lambda$-calculus a reasonable machine? Is there a way to measure the computational…
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 reconsider the problem of option pricing using historical probability distributions. We first discuss how the risk-minimisation scheme proposed recently is an adequate starting point under the realistic assumption that price increments…
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…
Prices of tradables can only be expressed relative to each other at any instant of time. This fundamental fact should therefore also hold for contigent claims, i.e. tradable instruments, whose prices depend on the prices of other tradables.…
We consider a random interval splitting process, in which the splitting rule depends on the empirical distribution of interval lengths. We show that this empirical distribution converges to a limit almost surely as the number of intervals…
By studying the statistics of recurrence intervals, $\tau$, between volatilities of Internet traffic rate changes exceeding a certain threshold $q$, we find that the probability distribution functions, $P_{q}(\tau)$, for both byte and…
We consider the Bachelier model with linear price impact. Exponential utility indifference prices are studied for vanilla European options in the case where the investor is required to liquidate her position. Our main result is establishing…
In this paper, we present a quantum version of some portions of Mathematical Finance, including theory of arbitrage, asset pricing, and optional decomposition in financial markets based on finite dimensional quantum probability spaces. As…
Slot and van Emde Boas' weak invariance thesis states that reasonable machines can simulate each other within a polynomially overhead in time. Is lambda-calculus a reasonable machine? Is there a way to measure the computational complexity…