Related papers: Reduced-form setting under model uncertainty with …

We reexamine the classical linear regression model when the model is subject to two types of uncertainty: (i) some of covariates are either missing or completely inaccessible, and (ii) the variance of the measurement error is undetermined…

Affine term structure models have gained significant attention in the finance literature, mainly due to their analytical tractability and statistical flexibility. The aim of this article is to present both theoretical foundations as well as…

In this work we consider one-dimensional generalized affine processes under the paradigm of Knightian uncertainty (so-called non-linear generalized affine models). This extends and generalizes previous results in Fadina et al. (2019) and…

The intensity of a default time is obtained by assuming that the default indicator process has an absolutely continuous compensator. Here we drop the assumption of absolute continuity with respect to the Lebesgue measure and only assume…

This paper identifies a new class of shape invariant models. These models are based on extensions of conventional quantum mechanics that satisfy a string-motivated minimal length uncertainty relation. An important feature of our…

In this article we propose a study of market models starting from a set of axioms, as one does in the case of risk measures. We define a market model simply as a mapping from the set of adapted strategies to the set of random variables…

To analyze the uncertain data frequently encountered in practice, this paper proposes novel fixed-effects models that incorporate an uncertain measure to investigate variables of interest and nuisance variables in factor designs. First, an…

Robust optimization methods have shown practical advantages in a wide range of decision-making applications under uncertainty. Recently, their efficacy has been extended to multi-period settings. Current approaches model uncertainty either…

We investigate financial markets under model risk caused by uncertain volatilities. For this purpose we consider a financial market that features volatility uncertainty. To have a mathematical consistent framework we use the notion of…

Foundation models for segmentation such as the Segment Anything Model (SAM) family exhibit strong zero-shot performance, but remain vulnerable in shifted or limited-knowledge domains. This work investigates whether uncertainty…

Statistical models typically capture uncertainties in our knowledge of the corresponding real-world processes, however, it is less common for this uncertainty specification to capture uncertainty surrounding the values of the inputs to the…

It is well known that the minimal superhedging price of a contingent claim is too high for practical use. In a continuous-time model uncertainty framework, we consider a relaxed hedging criterion based on acceptable shortfall risks.…

This paper presents a probabilistic approach to represent and quantify model-form uncertainties in the reduced-order modeling of complex systems using operator inference techniques. Such uncertainties can arise in the selection of an…

We derive a backward and forward nonlinear PDEs that govern the implied volatility of a contingent claim whenever the latter is well-defined. This would include at least any contingent claim written on a positive stock price whose payoff at…

This paper presents a stochastic model for discrete-time trading in financial markets where trading costs are given by convex cost functions and portfolios are constrained by convex sets. The model does not assume the existence of a cash…

We investigate the implementation of reduced-form allocation probabilities in a two-person bargaining problem without side payments, where the agents have to select one alternative from a finite set of social alternatives. We provide a…

Model-form uncertainty (MFU) in assumptions made during physics-based model development is widely considered a significant source of uncertainty; however, there are limited approaches that can quantify MFU in predictions extrapolating…

The two main approaches in credit risk are the structural approach pioneered in Merton (1974) and the reduced-form framework proposed in Jarrow & Turnbull (1995) and in Artzner & Delbaen (1995). The goal of this article is to provide a…

We develop a version of the fundamental theorem of asset pricing for discrete-time markets with proportional transaction costs and model uncertainty. A robust notion of no-arbitrage of the second kind is defined and shown to be equivalent…

It is shown that absence of arbitrage opportunity in financial markets is a particular case of existence of uncertainty in decision system. Absence of arbitrage opportunity is considered in the sense of the Arrow-Debreu model of financial…