Related papers: On certain representations of pricing functionals
This work focuses on the indifference pricing of American call option underlying a non-traded stock, which may be partially hedgeable by another traded stock. Under the exponential forward measure, the indifference price is formulated as a…
Regularization plays a key role in a variety of optimization formulations of inverse problems. A recurring theme in regularization approaches is the selection of regularization parameters, and their effect on the solution and on the optimal…
Perpetual American options are financial instruments that can be readily exercised and do not mature. In this paper we study in detail the problem of pricing this kind of derivatives, for the most popular flavour, within a framework in…
We consider a deterministic continuous time model of monopolistic firm, which chooses production and pricing strategies of a single good. Firm's goal is to maximize the discounted profit over infinite time horizon. The no-backlogging…
We discuss two numerical methods, based on a path integral approach described in a previous paper (I), for solving the stochastic equations underlying the financial markets: the Monte Carlo approach, and the Green function deterministic…
We consider the pricing of derivatives in a setting with trading restrictions, but without any probabilistic assumptions on the underlying model, in discrete and continuous time. In particular, we assume that European put or call options…
We study problems arising in real-time auction markets, common in e-commerce and computational advertising, where bidders face the problem of calculating optimal bids. We focus upon a contract management problem where a demand aggregator is…
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…
A bubble is characterized by the presence of an underlying asset whose discounted price process is a strict local martingale under the pricing measure. In such markets, many standard results from option pricing theory do not hold, and in…
The inverse optimal transport problem is to find the underlying cost function from the knowledge of optimal transport plans. While this amounts to solving a linear inverse problem, in this work we will be concerned with the nonlinear…
The theory of convex risk functions has now been well established as the basis for identifying the families of risk functions that should be used in risk averse optimization problems. Despite its theoretical appeal, the implementation of a…
Reference prices have long been studied in applied economics and business research. One of the classic formulations of the reference price is in terms of an iterative function of past prices. There are a number of limitations of such a…
We study an optimal stopping problem with an unbounded, time-dependent and discontinuous reward function. This problem is motivated by the pricing of a variable annuity contract with guaranteed minimum maturity benefit, under the assumption…
We consider class of equilibrium models including the implicit Walras supply-demand and competitive models. Such a model in this class, in general, is ill-posed. We formulate such a model in the form a variational inequality having certain…
It is well known how to determine the price of perpetual American options if the underlying stock price is a time-homogeneous diffusion. In the present paper we consider the inverse problem, that is, given prices of perpetual American…
We consider a discrete-time robust utility maximisation with semistatic strategies, and the associated indifference prices of exotic options. For this purpose, we introduce a robust form of convex integral functionals on the space of…
The price of a stock will rarely follow the assumed model and a curious investor or a Regulatory Authority may wish to obtain a probability model the prices support. A risk neutral probability ${\cal P}^*$ for the stock's price at time $T$…
This paper investigates the pricing of European-style lookback options when the price dynamics of the underlying risky asset are assumed to follow a Markov-modulated Geo-metric Brownian motion; that is, the appreciation rate and the…
Duality for robust hedging with proportional transaction costs of path dependent European options is obtained in a discrete time financial market with one risky asset. Investor's portfolio consists of a dynamically traded stock and a static…
Traditional insurance pricing relies on risk-based principles that ensure actuarial fairness and solvency but do not explicitly account for policyholders' price sensitivity. We formulate insurance pricing as a decision-making problem and…