Related papers: Designing a Combinatorial Financial Options Market
The programmable and composable nature of smart contract protocols has enabled the emergence of novel market structures and asset classes that are architecturally frictional to implement in traditional financial paradigms. This fluidity has…
\begin{abstract} The aim of this paper is to study the spanning power of options in a static financial market that allows non-integrable assets. Our findings extend and unify the results in [8,9,18] for $L_p$-models. We also apply the…
Bilateral trade is a fundamental economic scenario comprising a strategically acting buyer and seller, each holding valuations for the item, drawn from publicly known distributions. A mechanism is supposed to facilitate trade between these…
Financial markets such as bond, derivatives, and repo markets form networks of interdependent obligations. Existing multilateral netting methods typically trade off the extent of netting against preservation of counterparty exposure:…
Combinatorial auctions are formulated as frustrated lattice gases on sparse random graphs, allowing the determination of the optimal revenue by methods of statistical physics. Transitions between computationally easy and hard regimes are…
We consider a multi-asset incomplete model of the financial market, where each of $m\geq 2$ risky assets follows the binomial dynamics, and no assumptions are made on the joint distribution of the risky asset price processes. We provide…
A speculative agent with Prospect Theory preference chooses the optimal time to purchase and then to sell an indivisible risky asset to maximize the expected utility of the round-trip profit net of transaction costs. The optimization…
How to price and hedge claims on nontraded assets are becoming increasingly important matters in option pricing theory today. The most common practice to deal with these issues is to use another similar or "closely related" asset or index…
A variance swap is a derivative with a path-dependent payoff which allows investors to take positions on the future variability of an asset. In the idealised setting of a continuously monitored variance swap written on an asset with…
In sponsored search, advertisement (abbreviated ad) slots are usually sold by a search engine to an advertiser through an auction mechanism in which advertisers bid on keywords. In theory, auction mechanisms have many desirable economic…
We study a general online combinatorial auction problem in algorithmic mechanism design. A provider allocates multiple types of capacity-limited resources to customers that arrive in a sequential and arbitrary manner. Each customer has a…
We introduce a fairly general, recombining trinomial tree model in the natural world. Market-completeness is ensured by considering a market consisting of two risky assets, a riskless asset, and a European option. The two risky assets…
A decisionmaker faces $n$ alternatives, each of which represents a potential reward. After investing costly resources into investigating the alternatives, the decisionmaker may select one, or more generally a feasible subset, and obtain the…
Using spectral decomposition techniques and singular perturbation theory, we develop a systematic method to approximate the prices of a variety of options in a fast mean-reverting stochastic volatility setting. Four examples are provided in…
Financial contracts with options that allow the holder to extend the contract maturity by paying an additional fixed amount found many applications in finance. Closed-form solutions for the price of these options have appeared in the…
For Bayesian combinatorial auctions, we present a general framework for approximately reducing the mechanism design problem for multiple buyers to single buyer sub-problems. Our framework can be applied to any setting which roughly…
Mathematically, the execution of an American-style financial derivative is commonly reduced to solving an optimal stopping problem. Breaking the general assumption that the knowledge of the holder is restricted to the price history of the…
In this paper, we combine modern portfolio theory and option pricing theory so that a trader who takes a position in a European option contract and the underlying assets can construct an optimal portfolio such that at the moment of the…
Although both data availability and the demand for accurate forecasts are increasing, collaboration between stakeholders is often constrained by data ownership and competitive interests. In contrast to recent proposals within cooperative…
This paper gives an arbitrage-free prediction for future prices of an arbitrary co-terminal set of options with a given maturity, based on the observed time series of these option prices. The statistical analysis of such a multi-dimensional…