Related papers: Risk-Neutral Market Simulation
We consider a discrete-time financial market model with finite time horizon and give conditions which guarantee the existence of an optimal strategy for the problem of maximizing expected terminal utility. Equivalent martingale measures are…
We consider a nondominated model of a discrete-time financial market where stocks are traded dynamically, and options are available for static hedging. In a general measure-theoretic setting, we show that absence of arbitrage in a…
Markets composed of stocks with capitalization processes represented by positive continuous semimartingales are studied under the condition that the market excess growth rate is bounded away from zero. The following examples of these…
In this paper we investigate the local risk-minimization approach for a semimartingale financial market where there are restrictions on the available information to agents who can observe at least the asset prices. We characterize the…
We consider a general class of diffusion-based models and show that, even in the absence of an Equivalent Local Martingale Measure, the financial market may still be viable, in the sense that strong forms of arbitrage are excluded and…
We study a robust utility maximization problem in a general discrete-time frictionless market under quasi-sure no-arbitrage. The investor is assumed to have a random and concave utility function defined on the whole real-line. She also…
We study a risk-sharing economy where an arbitrary number of heterogenous agents trades an arbitrary number of risky assets subject to quadratic transaction costs. For linear state dynamics, the forward-backward stochastic differential…
In some options markets (e.g. commodities), options are listed with only a single maturity for each underlying. In others, (e.g. equities, currencies), options are listed with multiple maturities. In this paper, we provide an algorithm for…
Market simulator tries to create high-quality synthetic financial data that mimics real-world market dynamics, which is crucial for model development and robust assessment. Despite continuous advancements in simulation methodologies, market…
In complete markets, there are risky assets and a riskless asset. It is assumed that the riskless asset and the risky asset are traded continuously in time and that the market is frictionless. In this paper, we propose a new method for…
In the paper we develop mathematical tools of quantile hedging in incomplete market. Those could be used for two significant applications: o calculating the \textbf{optimal capital requirement imposed by Solvency II} (Directive 2009/138/EC…
We find the variance-optimal equivalent martingale measure when multivariate assets are modeled by a regime-switching geometric Brownian motion, and the regimes are represented by a homogeneous continuous time Markov chain. Under this new…
When interest rate dynamics are described by the Libor Market Model as in BGM97, we show how some essential risk-management results can be obtained from the dual of the calibration program. In particular, if the objetive is to maximize…
In this paper, we introduce a numeraire-free and original probability based framework for financial markets. We reformulate or characterize fair markets, the optional decomposition theorem, superhedging, attainable claims and complete…
We present a new, tractable method for solving and analyzing risk-aware control problems over finite and infinite, discounted time-horizons where the dynamics of the controlled process are described as a martingale problem. Supposing…
An agent-based model with interacting low frequency liquidity takers inter-mediated by high-frequency liquidity providers acting collectively as market makers can be used to provide realistic simulated price impact curves. This is possible…
The paper investigates quadratic hedging in a semimartingale market that does not necessarily contain a risk-free asset. An equivalence result for hedging with and without numeraire change is established. This permits direct computation of…
In a semimartingale financial market model, it is shown that there is equivalence between absence of arbitrage of the first kind (a weak viability condition) and the existence of a strictly positive process that acts as a local martingale…
Pari-mutuel markets are trading platforms through which the common market maker simultaneously clears multiple contingent claims markets. This market has several distinctive properties that began attracting the attention of the financial…
This work focuses on the mathematical study of constant function market makers. We rigorously establish the conditions for optimal trading under the assumption of a quasilinear, but not necessarily convex (or concave), trade function. This…