Related papers: A primer on perpetuals
Market-based mechanisms such as auctions are being studied as an appropriate means for resource allocation in distributed and mulitagent decision problems. When agents value resources in combination rather than in isolation, they must often…
An agent holds a position in a perpetual contract with payoff function $\psi$ and attempts to liquidate the position while managing transaction costs, inventory risk, and funding rate payments. By solving the agent's stochastic control…
Explicit robust hedging strategies for convex or concave payoffs under a continuous semimartingale model with uncertainty and small transaction costs are constructed. In an asymptotic sense, the upper and lower bounds of the cumulative…
I unravel the basic long run dynamics of the broker call money market, which is the pile of cash that funds margin loans to retail clients (read: continuous time Kelly gamblers). Call money is assumed to supply itself perfectly…
This paper proposes to model asset price dynamics with a mixture of diffusion processes where the instantaneous volatility of the underlying diffusion process contains a random vector. The marginal probability distributions of the proposed…
Perpetual swaps are derivative contracts that allow traders to speculate on, or hedge, the price movements of cryptocurrencies. Unlike futures contracts, perpetual swaps have no settlement or expiration in the traditional sense. The funding…
In this paper we propose a new model for pricing stock and dividend derivatives. We jointly specify dynamics for the stock price and the dividend rate such that the stock price is positive and the dividend rate non-negative. In its simplest…
In a discrete time setting, we study the central problem of giving a fair price to some financial product. For several decades, the no-arbitrage conditions and the martingale measures have played a major role for solving this problem. We…
This paper investigates how the conditional quantiles of future returns and volatility of financial assets vary with various measures of ex-post variation in asset prices as well as option-implied volatility. We work in the flexible…
The paper reviews origins of the approach to pricing derivatives post-crisis by following three papers that have received wide acceptance from practitioners as the theoretical foundations for it - [Piterbarg 2010], [Burgard and Kjaer 2010]…
We study the upper hedging price for contingent claims in market models with strong types of arbitrage: increasing profit, strong arbitrage, and arbitrage of the first kind. The existence of arbitrage may make the price smaller than if it…
The aim of this paper is to present a dual-term structure model of interest rate derivatives in order to solve the two hardest problems in financial modeling: the exact volatility calibration of the entire swaption matrix, and the…
We characterize the price of an Asian option, a financial contract, as a fixed-point of a non-linear operator. In recent years, there has been interest in incorporating changes of regime into the parameters describing the evolution of the…
Double no-touch options, contracts which pay out a fixed amount provided an underlying asset remains within a given interval, are commonly traded, particularly in FX markets. In this work, we establish model-free bounds on the price of…
We study a financial market where the risky asset is modelled by a geometric It\^o-L\'{e}vy process, with a singular drift term. This can for example model a situation where the asset price is partially controlled by a company which…
We consider the supOU stochastic volatility model which is able to exhibit long-range dependence. For this model we give conditions for the discounted stock price to be a martingale, calculate the characteristic function, give a strip where…
A standing assumption in the literature on proportional transaction costs is efficient friction. Together with robust no free lunch with vanishing risk, it rules out strategies of infinite variation, as they usually appear in frictionless…
This paper deals with applications of coherent risk measures to pricing in incomplete markets. Namely, we study the No Good Deals pricing technique based on coherent risk. Two forms of this technique are presented: one defines a good deal…
We consider the optimal investment problem when the traded asset may default, causing a jump in its price. For an investor with constant absolute risk aversion, we compute indifference prices for defaultable bonds, as well as a price for…
I introduce an agent-based model of a Perpetual Futures market with heterogeneous agents trading via a central limit order book. Perpetual Futures (henceforth Perps) are financial derivatives introduced by the economist Robert Shiller,…