Related papers: Pricing with Variance Gamma Information
The general method is proposed for constructing a family of martingale measures for a wide class of evolution of risky assets. The sufficient conditions are formulated for the evolution of risky assets under which the family of equivalent…
The objective of this paper is to introduce the theory of option pricing for markets with informed traders within the framework of dynamic asset pricing theory. We introduce new models for option pricing for informed traders in complete…
This paper studies arbitrage pricing theory in financial markets with implicit transaction costs. We extend the existing theory to include the more realistic possibility that the price at which the investors trade is dependent on the traded…
We apply rough-path theory to study the discrete-time gamma-hedging strategy. We show that if a trader knows that the market price of a set of European options will be given by a diffusive pricing model, then the discrete-time gamma-hedging…
We model the logarithm of the price (log-price) of a financial asset as a random variable obtained by projecting an operator stable random vector with a scaling index matrix $\underline{\underline{E}}$ onto a non-random vector. The scaling…
We consider a financial contract that delivers a single cash flow given by the terminal value of a cumulative gains process. The problem of modelling and pricing such an asset and associated derivatives is important, for example, in the…
The valuation process that economic agents undergo for investments with uncertain payoff typically depends on their statistical views on possible future outcomes, their attitudes toward risk, and, of course, the payoff structure itself.…
The binary information collects all those events that may or may not occur. With this kind of variables, a large amount of information can be captured, in particular, about financial assets and their future trends. In our paper, we assume…
The random values and volumes of consecutive trades made at the exchange with shares of security determine its mean, variance, and higher statistical moments. The volume weighted average price (VWAP) is the simplest example of such a…
In this paper we provide a comprehensive analysis of a structural model for the dynamics of prices of assets traded in a market originally proposed in [1]. The model takes the form of an interacting generalization of the geometric Brownian…
Information-theoretic principles for learning and acting have been proposed to solve particular classes of Markov Decision Problems. Mathematically, such approaches are governed by a variational free energy principle and allow solving MDP…
We consider the mean-variance hedging problem under partial information in the case where the flow of observable events does not contain the full information on the underlying asset price process. We introduce a martingale equation of a new…
This paper provides sufficient conditions for the time of bankruptcy (of a company or a state) for being a totally inaccessible stopping time and provides the explicit computation of its compensator in a framework where the flow of market…
In this paper we complete and extend our previous work on stochastic control applied to high frequency market-making with inventory constraints and directional bets. Our new model admits several state variables (e.g. market spread,…
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…
Applications of Quantum Tunneling effect have long gone beyond the traditional physical meaning. Initially created by Gamow to explain {\alpha}-decay of nuclear particles, along the time, quantum tunneling found fertile domain of research…
The rapidly growing hedge fund industry has provided individual and institutional investors with new investment vehicles and styles of management. It has also brought forward a new form of performance contract: hedge fund managers receive…
We introduce two new classes of measures of information for statistical experiments which generalise and subsume $\phi$-divergences, integral probability metrics, $\mathfrak{N}$-distances (MMD), and $(f,\Gamma)$ divergences between two or…
A triplet $(\mathbb{P},\mathbb{F},S)$ of a probability measure $\mathbb{P}$, of an information flow $\mathbb{F}=(\mathcal{F}_t)_{t\in\mathbb{R}_+}$, and of an $\mathbb{F}$ adapted asset process $S$, is a financial market model, only if it…
Travel time derivatives are financial instruments that derive their value from road travel times, serving as an underlying asset that cannot be directly traded. Within the transportation domain, these derivatives are proposed as a more…