Related papers: European baskets in discrete-time continuous-binom…

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…

In a model with no given probability measure, we consider asset pricing in the presence of frictions and other imperfections and characterize the property of coherent pricing, a notion related to (but much weaker than) the no arbitrage…

Paper is based on "The cost of illiquidity and its effects on hedging", L. C. G. Rogers and Surbjeet Singh, 2010. We generalize its thesis to constant elasticity model, which own previously used Black-Schoels model as a special case. The…

We study the problem of determination of asset prices in an incomplete market proposing three different but related scenarios. One scenario uses a market game approach whereas the other two are based on risk sharing or regret minimizing…

We consider the problem of hedging a European interest rate contingent claim with a portfolio of zero-coupon bonds and show that an HJM type Markovian model driven by an infinite number of sources of randomness does not have some of the…

Given the marginal distribution information of the underlying asset price at two future times $T_1$ and $T_2$, we consider the problem of determining a model-free upper bound on the price of a class of American options that must be…

Model uncertainty is a type of inevitable financial risk. Mistakes on the choice of pricing model may cause great financial losses. In this paper we investigate financial markets with mean-volatility uncertainty. Models for stock markets…

This paper deals with the problem of discrete-time option pricing by the mixed fractional version of Merton model with transaction costs. By a mean-self-financing delta hedging argument in a discrete-time setting, a European call option…

We derive a new high-order compact finite difference scheme for option pricing in stochastic volatility jump models, e.g. in Bates model. In such models the option price is determined as the solution of a partial integro-differential…

It is well-known that using delta hedging to hedge financial options is not feasible in practice. Traders often rely on discrete-time hedging strategies based on fixed trading times or fixed trading prices (i.e., trades only occur if the…

This paper presents a stochastic model for discrete-time trading in financial markets where trading costs are given by convex cost functions and portfolios are constrained by convex sets. The model does not assume the existence of a cash…

We study a financial model with a non-trivial price impact effect. In this model we consider the interaction of a large investor trading in an illiquid security, and a market maker who is quoting prices for this security. We assume that the…

Dynamic pricing of goods in a competitive environment to maximize revenue is a natural objective and has been a subject of research over the years. In this paper, we focus on a class of markets exhibiting the substitutes property with…

In this paper, local linear estimators are adapted for the unknown infinitesimal coefficients associated with continuous-time asset return model with jumps, which can correct the bias automatically due to their simple bias representation.…

We formulate a continuous-time competitive equilibrium model of irreversible capacity investment in which a continuum of heterogeneous producers supplies a single non-durable good subject to exogenous stochastic demand. Each producer…

We derive explicit formulas for time decay, for the European call and put options at expiry, and use them to calculate analytical approximations to the price of the American put and early exercise boundary near expiry. We show that for many…

This paper develops three polynomial-time pricing techniques for European Asian options with provably small errors, where the stock prices follow binomial trees or trees of higher-degree. The first technique is the first known Monte Carlo…

We consider the problem of approximation of density functions which is important in the theory of pricing of basket options. Our method is well adopted to the multidimensional case. Observe that implementations of polynomial and spline…

We study the problem of maximising terminal utility for an agent facing model uncertainty, in a frictionless discrete-time market with one safe asset and finitely many risky assets. We show that an optimal investment strategy exists if the…

We introduce and discuss a general criterion for the derivative pricing in the general situation of incomplete markets, we refer to it as the No Almost Sure Arbitrage Principle. This approach is based on the theory of optimal strategy in…