Related papers: Utility Indifference Pricing with High Risk Aversi…
We solve in closed-form an equilibrium model in which a finite number of exponential investors continuously consume and trade with price-impact. Compared to the analogous Pareto-efficient equilibrium model, price-impact has an amplification…
We study the hedging and valuation of European and American claims on a non-traded asset $Y$, when a traded stock $S$ is available for hedging, with $S$ and $Y$ following correlated geometric Brownian motions. This is an incomplete market,…
We provide a bound for the error committed when using a Fourier method to price European options when the underlying follows an exponential \levy dynamic. The price of the option is described by a partial integro-differential equation…
The strengthening of capital requirements has induced banks and traders to consider charging a so called capital valuation adjustment (KVA) to the clients in OTC transactions. This roughly corresponds to charge the clients ex-ante the…
We study the price of anarchy of mechanisms in the presence of risk-averse agents. Previous work has focused on agents with quasilinear utilities, possibly with a budget. Our model subsumes this as a special case but also captures that…
In a Markovian stochastic volatility model, we consider financial agents whose investment criteria are modelled by forward exponential performance processes. The problem of contingent claim indifference valuation is first addressed and a…
We develop a theory for option pricing with perfect hedging in an inefficient market model where the underlying price variations are autocorrelated over a time tau. This is accomplished by assuming that the underlying noise in the system is…
We study an optimization problem for a portfolio with a risk-free, a liquid, and an illiquid risky asset. The illiquid risky asset is sold in an exogenous random moment with a prescribed liquidation time distribution. The investor prefers a…
To determine the welfare implications of price changes in demand data, we introduce a revealed preference relation over prices. We show that the absence of cycles in this relation characterizes a consumer who trades off the utility of…
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 consider the problem of computing the Value Adjustment of European contingent claims when default of either party is considered, possibly including also funding and collateralization requirements. As shown in Brigo et al. (\cite{BLPS},…
This memoir presents a systematic study of the utility maximization problem of an investor in a constrained and unbounded financial market. Building upon the work of Hu et al. (2005) [Ann. Appl. Probab., 15, 1691--1712] in a bounded…
The purpose of this article is to introduce a new L\'evy process, termed Variance Gamma++ process, to model the dynamic of assets in illiquid markets. Such a process has the mathematical tractability of the Variance Gamma process and is…
This paper presents a method for incorporating risk aversion into existing decision tree models used in economic evaluations. The method involves applying a probability weighting function based on rank dependent utility theory to reduced…
This paper studies the optimal investment problem with random endowment in an inventory-based price impact model with competitive market makers. Our goal is to analyze how price impact affects optimal policies, as well as both pricing rules…
In the context of an incomplete market with a Brownian filtration and a fixed finite time horizon, this paper proves that for general dynamic convex risk measures, the buyer's and seller's risk indifference prices of a contingent claim are…
We derive the implied volatility estimation formula in European power call options pricing, where the payoff functions are in the form of $V=(S^{\alpha}_T-K)^{+}$ and $V=(S^{\alpha}_T-K^{\alpha})^{+}$ ($\alpha>0$)respectively. Using…
We prove a scaling limit theorem for the super-replication cost of options in a Cox--Ross--Rubinstein binomial model with transient price impact. The correct scaling turns out to keep the market depth parameter constant while resilience…
We adress the maximization problem of expected utility from terminal wealth. The special feature of this paper is that we consider a financial market where the price process of risky assets can have a default time. Using dynamic…
This review presents the set of electricity price models proposed in the literature since the opening of power markets. We focus on price models applied to financial pricing and risk management. We classify these models according to their…