Related papers: Risk-Neutral Market Simulation
We consider a discrete time financial market with proportional transaction costs under model uncertainty, and study a num\'eraire-based semi-static utility maximization problem with an exponential utility preference. The randomization…
In a fixed time horizon, appropriately executing a large amount of a particular asset -- meaning a considerable portion of the volume traded within this frame -- is challenging. Especially for illiquid or even highly liquid but also highly…
This article investigates a regime-switching investment strategy aimed at mitigating downside risk by reducing market exposure during anticipated unfavorable market regimes. We highlight the statistical jump model (JM) for market regime…
The effectiveness of utility-maximization techniques for portfolio management relies on our ability to estimate correctly the parameters of the dynamics of the underlying financial assets. In the setting of complete or incomplete financial…
In a two-period financial market where a stock is traded dynamically and European options at maturity are traded statically, we study the so-called martingale Schr\"odinger bridge Q*; that is, the minimal-entropy martingale measure among…
We present a simple, yet realistic, agent-based model of an electricity market. The proposed model combines the spot and balancing markets with a resolution of one minute, which enables a more accurate depiction of the physical properties…
We introduce a non-Markovian model for electricity markets where the spot price of electricity is driven by several Gaussian Volterra processes, which can be e.g., fractional Brownian motions (fBms), Riemann-Liouville processes or…
We consider a collection of derivatives that depend on the price of an underlying asset at expiration or maturity. The absence of arbitrage is equivalent to the existence of a risk-neutral probability distribution on the price; in…
In a one-sided limit order book, satisfying some realistic assumptions, where the unaffected price process follows a Levy process, we consider a market agent that wants to liquidate a large position of shares. We assume that the agent has…
The Marketron model, introduced by [Halperin, Itkin, 2025], describes price formation in inelastic markets as the nonlinear diffusion of a quasiparticle (the marketron) in a multidimensional space comprising the log-price $x$, a memory…
A representative investor generates realistic and complex security price paths by following this trading strategy: if, a few ticks ago, the market asset had two consecutive upticks or two consecutive downticks, then sell, and otherwise buy.…
Financial markets tend to switch between various market regimes over time, making stationarity-based models unsustainable. We construct a regime-switching model independent of asset classes for risk-adjusted return predictions based on…
In this work, we aim to gain a better understanding of the volatility smile observed in options markets through microsimulation (MS). We adopt two types of active traders in our MS model: speculators and arbitrageurs, and call and put…
Recent literature seek to forecast implied volatility derived from equity, index, foreign exchange, and interest rate options using latent factor and parametric frameworks. Motivated by increased public attention borne out of the…
We calculate the realized volatility in the spin model of financial markets and examine the returns standardized by the realized volatility. We find that moments of the standardized returns agree with the theoretical values of standard…
Several studies have focused on the Realized Range Volatility, an estimator of the quadratic variation of financial prices, taking into account the impact of microstructure noise and jumps. However, none has considered direct modeling and…
The paper introduces benchmark-neutral pricing and hedging for long-term contingent claims. It employs the growth optimal portfolio of the stocks as numeraire and the new benchmark-neutral pricing measure for pricing. For a realistic…
A risk-neutral valuation framework is developed for pricing and hedging in-play football bets based on modelling scores by independent Poisson processes with constant intensities. The Fundamental Theorems of Asset Pricing are applied to…
We propose a hedging approach for general contingent claims when liquidity is a concern and trading is subject to transaction cost. Multiple assets with different liquidity levels are available for hedging. Our risk criterion targets a…
Existing approaches to asset-pricing under model-uncertainty adapt classical utility-maximization frameworks and seek theoretical comprehensiveness. We move toward practice by considering binary model-risks and by emphasizing 'constraints'…