Related papers: A Note on Utility Indifference Pricing with Delaye…
The aim of this short note is to present a solution to the discrete time exponential utility maximization problem in a case where the underlying asset has a multivariate normal distribution. In addition to the usual setting considered in…
In this paper we investigate a nonlinear generalization of the Black-Scholes equation for pricing American style call options in which the volatility term may depend on the underlying asset price and the Gamma of the option. We propose a…
In the general framework of a semimartingale financial model and a utility function $U$ defined on the positive real line, we compute the first-order expansion of marginal utility-based prices with respect to a ``small'' number of random…
We investigate a pricing rule that is applicable for streams of income or contingent claim liabilities and study how this rule changes under additional insider-type information that an investor might obtain. Considering a model where the…
For incomplete preference relations that are represented by multiple priors and/or multiple -- possibly multivariate -- utility functions, we define a certainty equivalent as well as the utility buy and sell prices and indifference price…
The Black-Scholes model gives vanilla Europen call option prices as a function of the volatility. We prove Lipschitz stability in the inverse problem of determining the implied volatility, which is a function of the underlying asset, from a…
We study the Option pricing with linear investment strategy based on discrete time trading of the underlying security, which unlike the existing continuous trading models provides a feasible real market implementation. Closed form formulas…
Recently, the volatility associated with marginal prices has increased due to large scale integration of renewable generation. Price volatility is undesirable from a consumer perspective. To address this issue, we present a framework for…
We study the pricing and hedging of derivative securities with uncertainty about the volatility of the underlying asset. Rather than taking all models from a prespecified class equally seriously, we penalise less plausible ones based on…
We present a differential machine learning method for zero-days-to-expiry (0DTE) options under a stochastic-volatility jump-diffusion model. To handle the ultra-short-maturity regime, we express the option price in Black-Scholes form with a…
Emphasizing the statistics of jumps crossing the strike and local time, we develop a decomposition of equity option risk premiums. Operationalizing this theoretical treatment, we equip the pricing kernel process with unspanned risks, embed…
This paper presents a discrete--time equity derivatives pricing model with default risk in a no--arbitrage framework. Using the equity--credit reduced form approach where default intensity mainly depends on the firm's equity value, we…
We address the information content of European option prices about volatility in terms of the Fisher information matrix. We assume that observed option prices are centred on the theoretical price provided by Heston's model disturbed by…
We introduce an interactive market setup with sequential auctions where agents receive variegated signals with a known deadline. The effects of differential information and mutual learning on the allocation of overall profit \& loss (P\&L)…
People often deviate from expected utility theory when making risky and intertemporal choices. While the effects of probabilistic risk and time delay have been extensively studied in isolation, their interplay and underlying theoretical…
Kusuoka [ Limit Theorem on Option Replication Cost with Transaction Costs, Ann. Appl. Probab. 5, 198--221, (1995).] showed how to obtain non-trivial scaling limits of superreplication prices in discrete-time models of a single risky asset…
This paper is concerned with Bayesian inference when the likelihood is analytically intractable but can be unbiasedly estimated. We propose an annealed importance sampling procedure for estimating expectations with respect to the posterior.…
In this article, we consider a 2 factors-model for pricing defaultable bond with discrete default intensity and barrier where the 2 factors are stochastic risk free short rate process and firm value process. We assume that the default event…
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…
We construct an utility-based dynamic asset pricing model for a limit order market. The price is nonlinear in volume and subject to market impact. We solve an optimal hedging problem under the market impact and derive the dynamics of the…