Related papers: Risk-neutral pricing for APT
We consider the problem of optimal investment with intermediate consumption in a general semimartingale model of an incomplete market, with preferences being represented by a utility stochastic field. We show that the key conclusions of the…
We discuss the time evolution of quotation of stocks and commodities and show that they form an Ising chain. We show that transaction costs induce arbitrage risk that usually is neglected. The full analysis of the portfolio theory is…
In this paper, we combine modern portfolio theory and option pricing theory so that a trader who takes a position in a European option contract and the underlying assets can construct an optimal portfolio such that at the moment of the…
In this paper, we study expected utility maximization under ratchet and drawdown constraints on consumption in a general incomplete semimartingale market using duality methods. The optimization is considered with respect to two parameters:…
Consider a financial market in which an agent trades with utility-induced restrictions on wealth. By introducing a general convex-analytic framework which includes the class of umbrella wedges in certain Riesz spaces and faces of convex…
This paper is the continuation of "Pricing with coherent risk" and deals with further applications of coherent risk measures to problems of finance. First, we study the optimization problem. Three forms of this problem are considered.…
We consider a general discrete-time financial market with proportional transaction costs as in [Kabanov, Stricker and R\'{a}sonyi Finance and Stochastics 7 (2003) 403--411] and [Schachermayer Math. Finance 14 (2004) 19--48]. In addition to…
An arbitrage strategy allows a financial agent to make certain profit out of nothing, i.e., out of zero initial investment. This has to be disallowed on economic basis if the market is in equilibrium state, as opportunities for riskless…
We propose a duality theory for multi-marginal repulsive cost that appear in optimal transport problems arising in Density Functional Theory. The related optimization problems involve probabilities on the entire space and, as minimizing…
We consider the martingale optimal transport duality for c\`adl\`ag processes with given initial and terminal laws. Strong duality and existence of dual optimizers (robust semi-static superhedging strategies) are proved for a class of…
There is vast empirical evidence that given a set of assumptions on the real-world dynamics of an asset, the European options on this asset are not efficiently priced in options markets, giving rise to arbitrage opportunities. We study…
Revert protection is a feature provided by some blockchain platforms that prevents users from incurring fees for failed transactions. We study the economic implications and benefits of revert protection in the context of priority gas…
We investigate how and when to diversify capital over assets, i.e., the portfolio selection problem, from a signal processing perspective. To this end, we first construct portfolios that achieve the optimal expected growth in i.i.d.…
Buying and selling of data online has increased substantially over the last few years. Several frameworks have already been proposed that study query pricing in theory and practice. The key guiding principle in these works is the notion of…
We study the two-times differentiability of the value functions of the primal and dual optimization problems that appear in the setting of expected utility maximization in incomplete markets. We also study the differentiability of the…
Price discrimination for maximizing expected profit is a well-studied concept in economics and there are various methods that achieve the maximum given the user type distribution and the budget constraints. In many applications,…
In this paper we study the problem of maximizing expected utility from the terminal wealth with proportional transaction costs and random endowment. In the context of the existence of consistent price systems, we consider the duality…
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…
In a discrete-time market, we study model-independent superhedging, while the semi-static superhedging portfolio consists of {\it three} parts: static positions in liquidly traded vanilla calls, static positions in other tradable, yet…
This paper studies the optimal consumption under the addictive habit formation preference in markets with transaction costs and unbounded random endowments. To model the proportional transaction costs, we adopt the Kabanov's multi-asset…