Related papers: Applications of a New Self-Financing Equation

We consider an optimal investment-consumption problem for a utility-maximizing investor who has access to assets with different liquidity and whose consumption rate as well as terminal wealth are subject to lower-bound constraints. Assuming…

We analyze an optimal trade execution problem in a financial market with stochastic liquidity. To this end we set up a limit order book model in which both order book depth and resilience evolve randomly in time. Trading is allowed in both…

We consider an infinite dimensional optimization problem motivated by mathematical economics. Within the celebrated "Arbitrage Pricing Model", we use probabilistic and functional analytic techniques to show the existence of optimal…

We consider a discrete-time model of a financial market where a risky asset is bought and sold with transactions having a transient price impact. It is shown that the corresponding utility maximization problem admits a solution. We manage…

In an incomplete semimartingale model of a financial market, we consider several risk-averse financial agents who negotiate the price of a bundle of contingent claims. Assuming that the agents' risk preferences are modelled by convex…

We present the closed-form solution to the problem of hedging price and quantity risks for energy retailers (ER), using financial instruments based on electricity price and weather indexes. Our model considers an ER who is intermediary in a…

Market making refers to a form of trading in financial markets characterized by passive orders which add liquidity to limit order books. Market makers are important for the proper functioning of financial markets worldwide. Given the…

Financial markets have developed a lot of strategies to control risks induced by market fluctuations. Mathematics has emerged as the leading discipline to address fundamental questions in finance as asset pricing model and hedging…

Market making of options with different maturities and strikes is a challenging problem due to its highly dimensional nature. In this paper, we propose a novel approach that combines a stochastic policy and reinforcement learning-inspired…

The paper introduces and studies hedging for game (Israeli) style extension of swing options considered as multiple exercise derivatives. Assuming that the underlying security can be traded without restrictions we derive a formula for…

We consider the impact of ambiguity on the optimal timing of a class of two-dimensional integral option contracts when the exercise payoff is a positively homogeneous measurable function. Hence, the considered class of exercise payoffs…

Eigenvalue estimates that are optimal in some sense have self-evident appeal and leave estimators with a sense of virtue and economy. So, it is natural that ongoing searches for effective strategies for difficult tasks such as estimating…

New form of sufficient optimality condition is obtained in comparison with the Mangasarian sufficiency theorem. Both finite and infinite values of objective functional are allowed since concepts of overtaking and weakly overtaking…

We study a novel class of mechanism design problems in which the outcomes are constrained by the payments. This basic class of mechanism design problems captures many common economic situations, and yet it has not been studied, to our…

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…

We consider reallocation problems in settings where the initial endowment of each agent consists of a subset of the resources. The private information of the players is their value for every possible subset of the resources. The goal is to…

Energy forecasting has attracted enormous attention over the last few decades, with novel proposals related to the use of heterogeneous data sources, probabilistic forecasting, online learn-ing, etc. A key aspect that emerged is that…

In a one-sided limit order book, satisfying some realistic assumptions, where the unaffected price process follows a Levy process, we consider a market agent that wants to liquidate a large position of shares. We assume that the agent has…

Inspired by recent work of P.-L. Lions on conditional optimal control, we introduce a problem of optimal stopping under bounded rationality: the objective is the expected payoff at the time of stopping, conditioned on another event. For…

The aim of this paper is to solve an optimal investment, consumption and life insurance problem when the investor is restricted to capital guarantee. We consider an incomplete market described by a jump-diffusion model with stochastic…