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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 an incomplete continuous-time securities market with uncertainty generated by Brownian motions, we derive closed-form solutions for the equilibrium interest rate and market price of risk processes. The economy has a finite number of…
We prove a version of First Fundamental Theorem of Asset Pricing under transaction costs for discrete-time markets with dividend-paying securities. Specifically, we show that the no-arbitrage condition under the efficient friction…
In commodity and energy markets swing options allow the buyer to hedge against futures price fluctuations and to select its preferred delivery strategy within daily or periodic constraints, possibly fixed by observing quoted futures…
One of the shortcomings of the Black and Scholes model on option pricing is the assumption that trading of the underlying asset does not affect the price of that asset. This assumption can be fulfilled only in perfectly liquid markets.…
This paper gives an arbitrage-free prediction for future prices of an arbitrary co-terminal set of options with a given maturity, based on the observed time series of these option prices. The statistical analysis of such a multi-dimensional…
Modelling joint dynamics of liquid vanilla options is crucial for arbitrage-free pricing of illiquid derivatives and managing risks of option trade books. This paper develops a nonparametric model for the European options book respecting…
We use a continuous version of the standard deviation premium principle for pricing in incomplete equity markets by assuming that the investor issuing an unhedgeable derivative security requires compensation for this risk in the form of a…
Our goal is to analyze the system of Hamilton-Jacobi-Bellman equations arising in derivative securities pricing models. The European style of an option price is constructed as a difference of the certainty equivalents to the value functions…
We study pricing and hedging under parameter uncertainty for a class of Markov processes which we call generalized affine processes and which includes the Black-Scholes model as well as the constant elasticity of variance (CEV) model as…
Based on empirical market data, a stochastic volatility model is proposed with volatility driven by fractional noise. The model is used to obtain a risk-neutrality option pricing formula and an option pricing equation.
This study introduces a new technique to recover the implicit discount factor in the derivative market using only European put and call prices: this discount is grounded in actual transactions in active markets. Moreover, this study…
We study robust notions of good-deal hedging and valuation under combined uncertainty about the drifts and volatilities of asset prices. Good-deal bounds are determined by a subset of risk-neutral pricing measures such that not only…
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 study hedging and pricing of unattainable contingent claims in a non-Markovian regime-switching financial model. Our financial market consists of a bank account and a risky asset whose dynamics are driven by a Brownian motion and a…
G-framework is presented by Peng [41] for measure risk under uncertainty. In this paper, we define fractional G-Brownian motion (fGBm). Fractional G-Brownian motion is a centered G-Gaussian process with zero mean and stationary increments…
In this paper we present a new method to compute the first-order approximation of the price of derivatives on futures in the context of multiscale stochastic volatility of Fouque \textit{et al.} (2011, CUP). It provides an alternative…
In a market of deterministic cash flows, given as an additive, symmetric relation of exchangeability on the finite signed Borel measures on the non-negative real time axis, it is shown that the only arbitrage-free price functional that…
We propose a model to quantify the effect of parameter uncertainty on the option price in the Heston model. More precisely, we present a Hamilton-Jacobi-Bellman framework which allows us to evaluate best and worst case scenarios under an…
This paper proposes a risk-averse approach to energy storage price arbitrage, leveraging conformal uncertainty quantification for electricity price predictions. The method addresses the significant challenges posed by the inherent…