Related papers: Black to Negative: Embedded optionalities in commo…
An explicit formula is derived for the value of weak information in a discrete time model that works for a wide range of utility functions including the logarithmic and power utility. We assume a complete market with a finite number of…
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.…
Using techniques from information geometry, we construct a semi-Hamiltonian system modelling trader beliefs in a binary asset market and study the impact of inequality or asymmetry in beliefs, information, and power on price dynamics. We…
A binary classifier that tries to predict if the price of an asset will increase or decrease naturally gives rise to a trading strategy that follows the prediction and thus always has a position in the market. Selective classification…
Quantum batteries can be charged by performing a work ``instantaneously'' in the limit of a large number of cells, achieving a so-called quantum advantage. In general, the work exhibits statistics that can be represented by a…
This article considers the pricing and hedging of a call option when liquidity matters, that is, either for a large nominal or for an illiquid underlying asset. In practice, as opposed to the classical assumptions of a price-taking agent in…
We introduce the concept of "negative bubbles" as the mirror image of standard financial bubbles, in which positive feedback mechanisms may lead to transient accelerating price falls. To model these negative bubbles, we adapt the…
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.…
We explore credit risk pricing by modeling equity as a call option and debt as the difference between the firm's asset value and a put option, following the structural framework of the Merton model. Our approach proceeds in two stages:…
Over 90% of exchange trading on crypto options has always been on the Deribit platform. This centralised crypto exchange only lists inverse products because they do not accept fiat currency. Currently, fiat-based traders can only make…
A version of indifference valuation of a European call option is proposed that includes statistical regularities of nonstochastic randomness. Classical relations (forward contract value and Black-Scholes formula) are obtained as particular…
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 this paper, we revisit the inverse Black-Scholes model, the existence of the solution is proved in more rigorous way, and the empirical study is done using different approach based on finite element method. The article leads to a measure…
The studied model was suggested to design a perfect hedging strategy for a large trader. In this case the implementation of a hedging strategy affects the price of the underlying security. The feedback-effect leads to a nonlinear version of…
We deal with some generalizations on a Black--Scholes model arising in financial mathematics. As novelty in this paper, we consider a variable volatility and abstract functional boundary conditions, which allow us to treat a very large…
The option is a financial derivative, which is regularly employed in reducing the risk of its underlying securities. However, investing in option is still risky. Such risk becomes much severer for speculators who utilize option as a means…
To assign a value to a portfolio, it is common to use Mark-to-Market prices. However, how should one proceed when the securities are illiquid? When transaction prices are scarce, how can one use all the available real-time information? In…
We consider the valuation of contingent claims with delayed dynamics in a Black&Scholes complete market model. We find a pricing formula that can be decomposed into terms reflecting the market values of the past and the present, showing how…
Machine learning models that incorporate concept learning as an intermediate step in their decision making process can match the performance of black-box predictive models while retaining the ability to explain outcomes in human…
This paper establishes the existence of equilibrium in an economy with production and a continuum of consumers, each of whose incomplete and price-dependent preferences are defined on commodities they may consider deleterious, bads which…