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We consider an agent who has access to a financial market, including derivative contracts, who looks to maximise her utility. Whilst the agent looks to maximise utility over one probability measure, or class of probability measures, she…
This paper presents a new model for options pricing. The Black-Scholes-Merton (BSM) model plays an important role in financial options pricing. However, the BSM model assumes that the risk-free interest rate, volatility, and equity premium…
The authors examine the concept of probability of default for asset-backed loans. In contrast to unsecured loans it is shown that probability of default can be defined as either a measure of the likelihood of the borrower failing to make…
A new constructivist approach to modeling in economics and theory of consciousness is proposed. The state of elementary object is defined as a set of its measurable consumer properties. A proprietor's refusal or consent for the offered…
We introduce the notion of fault tolerant mechanism design, which extends the standard game theoretic framework of mechanism design to allow for uncertainty about execution. Specifically, we define the problem of task allocation in which…
In the era of industry 4.0, procurement in supply chain management is the key to developing information management systems. It directly affects production planning failure. In this case, it is the process to prepare and confirming the…
Statistical estimation of the prediction uncertainty of physical models is typically hindered by the inadequacy of these models due to various approximations they are built upon. The prediction errors due to model inadequacy can be handled…
We propose and analyze a day-ahead reserve market model that handles bids from flexible loads. This pool market model takes into account the fact that a load modulation in one direction must usually be compensated later by a modulation of…
Accountability aims to provide explanations for why unwanted situations occurred, thus providing means to assign responsibility and liability. As such, accountability has slightly different meanings across the sciences. In computer science,…
Blockchain technology has emerged, and many previous studies have assessed its performance issues. However, less attention has been paid to the dependability attributes, which have been a critical topic in service provisioning, considering…
Model risk measures consequences of choosing a model in a class of possible alternatives. We find analytical and simulated bounds for payoff functions on classes of plausible alternatives of a given discrete model. We measure the impact of…
Signature methods have been widely and effectively used as a tool for feature extraction in statistical learning methods, notably in mathematical finance. They lack, however, interpretability: in the general case, it is unclear why…
This article prices OTC derivatives with either an exogenously determined initial margin profile or endogenously approximated initial margin. In the former case, margin valuation adjustment (MVA) is defined as the liability-side discounted…
In order to find a way of measuring the degree of incompleteness of an incomplete financial market, the rank of the vector price process of the traded assets and the dimension of the associated acceptance set are introduced. We show that…
When perturbation or unexpected events do occur, agents need protocols for repairing or reforming the supply chain. Unfortunate contingency could increase too much the cost of performance, while breaching the current contract may be more…
Machine learning models are increasingly used in a wide variety of financial settings. The difficulty of understanding the inner workings of these systems, combined with their wide applicability, has the potential to lead to significant new…
We propose and analyze numerically a simple dynamical model that describes the firm behaviors under uncertainty of demand forecast. Iterating this simple model and varying some parameters values we observe a wide variety of market dynamics…
In a stochastic volatility framework, we find a general pricing equation for the class of payoffs depending on the terminal value of a market asset and its final quadratic variation. This allows a pricing tool for European-style claims…
We show that shortfall risks of American options in a sequence of multinomial approximations of the multidimensional Black--Scholes (BS) market converge to the corresponding quantities for similar American options in the multidimensional BS…
We study the optimal design of electricity contracts among a population of consumers with different needs. This question is tackled within the framework of Principal-Agent problems in presence of adverse selection. The particular features…