Related papers: Valuing Tradeability in Exponential L\'evy Models
We study a robust portfolio optimization problem under model uncertainty for an investor with logarithmic or power utility. The uncertainty is specified by a set of possible L\'evy triplets; that is, possible instantaneous drift, volatility…
Using tools from spectral analysis, singular and regular perturbation theory, we develop a systematic method for analytically computing the approximate price of a derivative-asset. The payoff of the derivative-asset may be path-dependent.…
We construct a model of an exchange economy in which agents trade assets contingent on an observable signal, the probability of which depends on public opinion. The agents in our model are replaced occasionally and each person updates…
In this paper, we propose the exponential Levy neural network (ELNN) for option pricing, which is a new non-parametric exponential Levy model using artificial neural networks (ANN). The ELNN fully integrates the ANNs with the exponential…
We consider a generic market model with a single stock and with random volatility. We assume that there is a number of tradable options for that stock with different strike prices. The paper states the problem of finding a pricing rule that…
In this paper we consider the pricing of options on interest rates such as caplets and swaptions in the L\'evy Libor model developed by Eberlein and \"Ozkan (2005). This model is an extension to L\'evy driving processes of the classical…
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…
We study a dynamic portfolio optimization problem related to convergence trading, which is an investment strategy that exploits temporary mispricing by simultaneously buying relatively underpriced assets and selling short relatively…
Model uncertainty is a type of inevitable financial risk. Mistakes on the choice of pricing model may cause great financial losses. In this paper we investigate financial markets with mean-volatility uncertainty. Models for stock markets…
Exponential L\'evy processes can be used to model the evolution of various financial variables such as FX rates, stock prices, etc. Considerable efforts have been devoted to pricing derivatives written on underliers governed by such…
We consider a multi-stock continuous time incomplete market model with random coefficients. We study the investment problem in the class of strategies which do not use direct observations of the appreciation rates of the stocks, but rather…
Spot option prices, forwards and options on forwards relevant for the commodity markets are computed when the underlying process S is modelled as an exponential of a process {\xi} with memory as e.g. a L\'evy semi-stationary process.…
We study arbitrage opportunities, market viability and utility maximization in market models with an insider. Assuming that an economic agent possesses from the beginning an additional information in the form of a random variable G, which…
We establish a super-replication duality in a continuous-time financial model where an investor's trades adversely affect bid- and ask-prices for a risky asset and where market resilience drives the resulting spread back towards zero at an…
This paper analyzes the pricing of collateralized derivatives, i.e. contracts where counterparties are not only subject to financial derivatives cash flows but also to collateral cash flows arising from a collateral agreement. We do this…
This paper discusses the valuation of credit default swaps, where default is announced when the reference asset price has gone below certain level from the last record maximum, also known as the high-water mark or drawdown. We assume that…
In this article we consider an optimization problem of expected utility maximization of continuous-time trading in a financial market. This trading is constrained by a benchmark for a utility-based shortfall risk measure. The market…
We develop two alternate approaches to arbitrage-free, market-complete, option pricing. The first approach requires no riskless asset. We develop the general framework for this approach and illustrate it with two specific examples. The…
We propose a probabilistic framework for pricing derivatives, which acknowledges that information and beliefs are subjective. Market prices can be translated into implied probabilities. In particular, futures imply returns for these implied…
We characterize the price of a European option on several assets for a very risk averse seller, in a market with small transaction costs as a solution of a nonlinear diffusion equation. This problem turns out to be one of asymptotic…