Related papers: A constraint-based notion of illiquidity

In this paper we investigate model-independent bounds for exotic options written on a risky asset. Based on arguments from the theory of Monge-Kantorovich mass-transport we establish a dual version of the problem that has a natural…

This paper revisits the classic instrument choice problem in a setting with consumption externalities, through the lens of robust mechanism design. A regulator can implement any incentive-compatible policy but is uncertain about how…

Recently, there has been a growing interest in network research, especially in these fields of biology, computer science, and sociology. It is natural to address complex financial issues such as the European sovereign debt crisis from the…

Can uncertainty about credit availability trigger a slowdown in real activity? This question is answered by using a novel method to identify shocks to uncertainty in access to credit. Time-variation in uncertainty about credit availability…

In this paper, we consider a financial market with assets exposed to some risks inducing jumps in the asset prices, and which can still be traded after default times. We use a default-intensity modeling approach, and address in this…

This paper investigates the callable convertible bond problem in the presence of a liquidity constraint modelled by Poisson signals. We assume that neither the bondholder nor the firm has absolute priority when they stop the game…

We develop a finite horizon continuous time market model, where risk averse investors maximize utility from terminal wealth by dynamically investing in a risk-free money market account, a stock written on a default-free dividend process,…

In this paper we use a hybrid Monte Carlo-Optimal quantization method to approximate the conditional survival probabilities of a firm, given a structural model for its credit defaul, under partial information. We consider the case when the…

We study the concept of financial bubble in a market model endowed with a set of probability measures, typically mutually singular to each other. In this setting we introduce the notions of robust bubble and robust fundamental value in a…

Borrowing constraints are a key component of modern international macroeconomic models. The analysis of Emerging Markets (EM) economies generally assumes collateral borrowing constraints, i.e., firms access to debt is constrained by the…

We consider a market with a term structure of credit risky bonds in the single-name case. We aim at minimal assumptions extending existing results in this direction: first, the random field of forward rates is driven by a general…

We study the range of prices at which a rational agent should contemplate transacting a financial contract outside a given securities market. Trading is subject to nonproportional transaction costs and portfolio constraints and full…

We study a notion of good-deal hedging, that corresponds to good-deal valuation for generalized good-deal constraints. Under model uncertainty about the market prices of risk of hedging assets, a robust approach leads to a reduction or even…

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…

This work addresses the problem of optimal pricing and hedging of a European option on an illiquid asset Z using two proxies: a liquid asset S and a liquid European option on another liquid asset Y. We assume that the S-hedge is dynamic…

We introduce the concept of partial law invariance, generalizing the concepts of law invariance and probabilistic sophistication widely used in decision theory, as well as statistical and financial applications. This new concept is…

This study delves into the intricate realm of risk evaluation within the domain of specific financial derivatives, notably options. Unlike other financial instruments, like bonds, options are susceptible to broader risks. A distinctive…

Asset liquidity in modern financial markets is a key but elusive concept. A market is often said to be liquid when the prevailing structure of transactions provides a prompt and secure link between the demand and supply of assets, thus…

In this paper we analyse financial implications of exchangeability and similar properties of finite dimensional random vectors. We show how these properties are reflected in prices of some basket options in view of the well-known put-call…

We consider a model of debt management, where a sovereign state trade some bonds to service the debt with a pool of risk-neutral competitive foreign investors. At each time, the government decides which fraction of the gross domestic…