Related papers: Utility indifference Option Pricing Model with a N…
For utility functions $u$ finite valued on $\mathbb{R}$, we prove a duality formula for utility maximization with random endowment in general semimartingale incomplete markets. The main novelty of the paper is that possibly non locally…
We investigate the relation between the fair price for European-style vanilla options and the distribution of short-term returns on the underlying asset ignoring transaction and other costs. We compute the risk-neutral probability density…
We propose a price impact model where changes in prices are purely driven by the order flow in the market. The stochastic price impact of market orders and the arrival rates of limit and market orders are functions of the market liquidity…
When randomness in demand affects the sales of a product, retailers use dynamic pricing strategies to maximize their profits. In this article, we formulate the pricing problem as a continuous-time stochastic optimal control problem and find…
An optimal control problem is considered for a stochastic differential equation containing a state-dependent regime switching, with a recursive cost functional. Due to the non-exponential discounting in the cost functional, the problem is…
In this paper we consider a pairs trading financial market with the spread of risky assets defined by the Ornstein-Uhlenbeck (OU) process. We implement an optimal strategy for power utility functions for investment/consumption problem.…
This paper is concerned with the study of insurance related derivatives on financial markets that are based on non-tradable underlyings, but are correlated with tradable assets. We calculate exponential utility-based indifference prices,…
This paper enhances the pricing of derivatives as well as optimal control problems to a level comprising risk. We employ nested risk measures to quantify risk, investigate the limiting behavior of nested risk measures within the classical…
We consider the value function originating from an expected utility maximization problem with finite fuel constraint and show its close relation to a nonlinear parabolic degenerated Hamilton-Jacobi-Bellman (HJB) equation with singularity.…
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…
Financial derivatives pricing aims to find the fair value of a financial contract on an underlying asset. Here we consider option pricing in the partial differential equations framework. The contemporary models lead to one-dimensional or…
We propose a new `hedged' Monte-Carlo (HMC) method to price financial derivatives, which allows to determine simultaneously the optimal hedge. The inclusion of the optimal hedging strategy allows one to reduce the financial risk associated…
A price-maker company extracts an exhaustible commodity from a reservoir, and sells it instantaneously in the spot market. In absence of any actions of the company, the commodity's spot price evolves either as a drifted Brownian motion or…
In an equity market model with "Knightian" uncertainty regarding the relative risk and covariance structure of its assets, we characterize in several ways the highest return relative to the market that can be achieved using nonanticipative…
We study an optimal portfolio problem designed for an agent operating in intraday electricity markets. The investor is allowed to trade in a single risky asset modelling the continuously traded power and aims to maximize the expected…
In this paper, we consider the problem of optimal investment by an insurer. The insurer invests in a market consisting of a bank account and $m$ risky assets. The mean returns and volatilities of the risky assets depend nonlinearly on…
This paper studies a finite-horizon portfolio selection problem with non-concave terminal utility and proportional transaction costs, in which the commonly used concavification principle for terminal value is no longer applicable. We…
The purpose of this paper is to describe the numerical solution of the Hamilton-Jacobi-Bellman (HJB) for an optimal control problem for quantum spin systems. This HJB equation is a first order nonlinear partial differential equation defined…
We consider the valuation problem of an (insurance) company under partial information. Therefore we use the concept of maximizing discounted future dividend payments. The firm value process is described by a diffusion model with constant…
This is the first in a series of papers in which we study an efficient approximation scheme for solving the Hamilton-Jacobi-Bellman equation for multi-dimensional problems in stochastic control theory. The method is a combination of a WKB…