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We propose a formulation to construct new classes of financial price processes based on the insight that the key variable driving prices $P$ is the earning-over-price ratio $\gamma \simeq 1/P$, which we refer to as the earning yield and is…
In a continuous time stochastic economy, this paper considers the problem of consumption and investment in a financial market in which the representative investor exhibits a change in the discount rate. The investment opportunities are a…
We prove the global existence of an incomplete, continuous-time finite-agent Radner equilibrium in which exponential agents optimize their expected utility over both running consumption and terminal wealth. The market consists of a traded…
We pursue robust approach to pricing and hedging in mathematical finance. We consider a continuous time setting in which some underlying assets and options, with continuous paths, are available for dynamic trading and a further set of…
This paper establishes a stochastic maximum principle for optimal control problems governed by time-changed forward-backward stochastic differential equations with L\'evy noise. The system incorporates a random, non-decreasing operational…
The Markowitz problem consists of finding in a financial market a self-financing trading strategy whose final wealth has maximal mean and minimal variance. We study this in continuous time in a general semimartingale model and under cone…
We analyze the convergence properties of a robust adaptive model predictive control algorithm used to control an unknown nonlinear system. We show that by employing a standard quadratic stabilizing cost function, and by recursively updating…
Closed form option pricing formulae explaining skew and smile are obtained within a parsimonious non-Gaussian framework. We extend the non-Gaussian option pricing model of L. Borland (Quantitative Finance, {\bf 2}, 415-431, 2002) to include…
An optimal control problem is considered for a stochastic differential equation with the cost functional determined by a backward stochastic Volterra integral equation (BSVIE, for short). This kind of cost functional can cover the general…
Departing from the dominant approach focused on individual and meso-level determinants, this paper develops a macroeconomic formalization of job insecurity within a New Keynesian framework in which the standard IS-NKPC-Taylor rule block is…
We consider the problem of steering a linear stochastic system between two end-point degenerate Gaussian distributions in finite time. This accounts for those situations in which some but not all of the state entries are uncertain at the…
The comparative statics of the optimal portfolios across individuals is carried out for a continuous-time complete market model, where the risky assets price process follows a joint geometric Brownian motion with time-dependent and…
This paper studies the optimal risk-averse timing to sell a risky asset. The investor's risk preference is described by the exponential, power, or log utility. Two stochastic models are considered for the asset price -- the geometric…
Motivated from time-inconsistent stochastic control problems, we introduce a new type of coupled forward-backward stochastic systems, namely, flows of forward-backward stochastic differential equations. They are systems consisting of a…
We study a time-inconsistent singular stochastic control problem for a general one-dimensional diffusion, where time-inconsistency arises from a non-exponential discount function. To address this, we adopt a game-theoretic framework and…
Quantum theory is used to model secondary financial markets. Contrary to stochastic descriptions, the formalism emphasizes the importance of trading in determining the value of a security. All possible realizations of investors holding…
We study superreplication of European contingent claims in discrete time in a large trader model with market indifference prices recently proposed by Bank and Kramkov. We introduce a suitable notion of efficient friction in this framework,…
Focusing on gains & losses relative to a risk-free benchmark instead of terminal wealth, we consider an asset allocation problem to maximize time-consistently a mean-risk reward function with a general risk measure which is i)…
We derive an extremal fractional Gaussian by employing the L\'evy-Khintchine theorem and L\'evian noise. With the fractional Gaussian we then generalize the Black-Scholes-Merton option-pricing formula. We obtain an easily applicable and…
The article's aim is to provide a solution to the equity premium puzzle with a derived model. The derived model which depends on Consumption Capital Asset Pricing Model gives a solution to the puzzle with the values of coefficient of…