Related papers: No-Arbitrage Commodity Option Pricing with Market …
We present an arbitrage free theoretical framework for modeling bid and ask prices of dividend paying securities in a discrete time setup using theory of dynamic acceptability indices. In the first part of the paper we develop the theory of…
We obtain option pricing formulas for stock price models in which the drift and volatility terms are functionals of a continuous history of the stock prices. That is, the stock dynamics follows a nonlinear stochastic functional differential…
Realised pay-offs for discretisation-invariant swaps are those which satisfy a restricted `aggregation property' of Neuberger [2012] for twice continuously differentiable deterministic functions of a multivariate martingale. They are…
We introduce a simple stochastic volatility model, whose novelty consists in taking into account hitting times of the asset price, and study the optimal stopping problem corresponding to a put option whose time horizon (after the asset…
We study the influence of additional intermediate marginal distributions on the value of the martingale optimal transport problem. From a financial point of view, this corresponds to taking into account call option prices not only, as…
We consider the pricing problem related to payoffs that can have discontinuities of polynomial growth. The asset price dynamic is modeled within the Black and Scholes framework characterized by a stochastic volatility term driven by a…
We introduce a price impact model which accounts for finite market depth, tightness and resilience. Its coupled bid- and ask-price dynamics induce convex liquidity costs. We provide existence of an optimal solution to the classical problem…
We model the behavior of three agent classes acting dynamically in a limit order book of a financial asset. Namely, we consider market makers (MM), high-frequency trading (HFT) firms, and institutional brokers (IB). Given a prior dynamic of…
We analyze sources of error in prediction market forecasts in order to bound the difference between a security's price and the ground truth it estimates. We consider cost-function-based prediction markets in which an automated market maker…
We study a dynamic market setting where an intermediary interacts with an unknown large sequence of agents that can be either sellers or buyers: their identities, as well as the sequence length $n$, are decided in an adversarial, online…
We introduce a general framework for continuous-time betting markets, in which a bookmaker can dynamically control the prices of bets on outcomes of random events. In turn, the prices set by the bookmaker affect the rate or intensity of…
We introduce a stochastic heterogeneous interacting-agent model for the short-time non-equilibrium evolution of excess demand and price in a stylized asset market. We consider a combination of social interaction within peer groups and…
We study the situation of an agent who can trade on a financial market and can also transform some assets into others by means of a production system, in order to price and hedge derivatives on produced goods. This framework is motivated by…
We solve the problem of super-hedging European or Asian options for discrete-time financial market models where executable prices are uncertain. The risky asset prices are not described by single-valued processes but measurable selections…
Prediction markets are often used as mechanisms to aggregate information about a future event, for example, whether a candidate will win an election. The event is typically assumed to be exogenous. In reality, participants may influence the…
We propose an enhancement to wholesale electricity markets whereby the exposure of consumers to increasingly large and volatile consumer payments arising as a byproduct of volatile real-time net loads -- i.e., loads minus renewable outputs…
In the information-based approach to asset pricing the market filtration is modelled explicitly as a superposition of signals concerning relevant market factors and independent noise. The rate at which the signal is revealed to the market…
In this paper, we develop a general rough volatility model for commodities that provides an automatic calibration of the initial term structure of the futures prices and an appropriate treatment of the Samuelson effect. After 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…
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…