Related papers: Perpetual Futures Pricing
Siegel's paradox is a fundamental question in international finance about exchange rates for futures contracts and has puzzled many scholars for over forty years. The unorthodox approach presented in this article leads to an arbitrage-free…
We derive a backward and forward nonlinear PDEs that govern the implied volatility of a contingent claim whenever the latter is well-defined. This would include at least any contingent claim written on a positive stock price whose payoff at…
This paper formulates an utility indifference pricing model for investors trading in a discrete time financial market under non-dominated model uncertainty. The investors preferences are described by strictly increasing concave random…
For incomplete preference relations that are represented by multiple priors and/or multiple -- possibly multivariate -- utility functions, we define a certainty equivalent as well as the utility buy and sell prices and indifference price…
We prove that the perpetual American put option price of level dependent volatility model with compound Poisson jumps is convex and is the classical solution of its associated quasi-variational inequality, that it is $C^2$ except at the…
We study a general robust utility maximization problem in a discrete-time frictionless market. The investor is assumed to have a possibly infinite, random, nonconcave, and nondecreasing utility function defined on the whole real line. She…
In this study we consider the pricing of energy derivatives when the evolution of spot prices is modeled with a normal tempered stable driven Ornstein-Uhlenbeck process. Such processes are the generalization of normal inverse Gaussian…
In this paper, a general framework is developed for continuous-time financial market models defined from simple strategies through conditional topologies that avoid stochastic calculus and do not necessitate semimartingale models. We then…
We consider the pricing of derivatives written on the discretely sampled realized variance of an underlying security. In the literature, the realized variance is usually approximated by its continuous-time limit, the quadratic variation of…
In this note, we develop stock option price approximations for a model which takes both the risk o default and the stochastic volatility into account. We also let the intensity of defaults be influenced by the volatility. We show that it…
There are several approaches to modeling and forecasting time series as applied to prices of commodities and financial assets. One of the approaches is to model the price as a non-stationary time series process with heteroscedastic…
This paper establishes a non-stochastic analogue of the celebrated result by Dubins and Schwarz about reduction of continuous martingales to Brownian motion via time change. We consider an idealized financial security with continuous price…
We present a stochastic local volatility model for derivative contracts on commodity futures. The aim of the model is to be able to recover the prices of derivative claims both on futures contracts and on indices on futures strategies.…
In this paper, we combine modern portfolio theory and option pricing theory so that a trader who takes a position in a European option contract and the underlying assets can construct an optimal portfolio such that at the moment of the…
We test whether the futures prices of some commodity and energy markets are determined by stochastic rules or exhibit nonlinear deterministic endogenous fluctuations. As for the methodologies, we use the maximal Lyapunov exponents (MLE) and…
Time variation and persistence are crucial properties of volatility that are often studied separately in energy volatility forecasting models. Here, we propose a novel approach that allows shocks with heterogeneous persistence to vary…
Paper 1 of this research programme develops a resolution-aware risk-design framework for the simplest event-linked perpetual: a contract whose underlying tracks a single binary prediction-market probability through resolution. The…
We develop robust pricing and hedging of a weighted variance swap when market prices for a finite number of co--maturing put options are given. We assume the given prices do not admit arbitrage and deduce no-arbitrage bounds on the weighted…
Futures market contracts with varying maturities are traded concurrently and the speed at which they process information is of value in understanding the pricing discovery process. Using price discovery measures, including Putnins (2013)…
In this paper, we are concerned with the valuation of Guaranteed Annuity Options (GAOs) under the most generalised modelling framework where both interest and mortality rates are stochastic and correlated. Pricing these type of options in…