Related papers: Perpetual Futures Pricing
Recent empirical studies suggest that the volatility of an underlying price process may have correlations that decay slowly under certain market conditions. In this paper, the volatility is modeled as a stationary process with long-range…
We study the situation of an agent who can trade on a financial market and can also transform some assets into others by means of a production system, in order to price and hedge derivatives on produced goods. This framework is motivated by…
One of the peculiarities of power and gas markets is the delivery mechanism of forward contracts. The seller of a futures contract commits to deliver, say, power, over a certain period, while the classical forward is a financial agreement…
Why is ``worthless'' fiat money generally accepted as payment for goods and services? In equilibrium theory, the value of money is generally not determined: the number of equations is one less than the number of unknowns, so only relative…
We derive the price of a spread option based on two assets which follow a bivariate volatility modulated Volterra process dynamics. Such a price dynamics is particularly relevant in energy markets, modelling for example the spot price of…
We propose a continuous time model for financial markets with proportional transactions costs and a continuum of risky assets. This is motivated by bond markets in which the continuum of assets corresponds to the continuum of possible…
We estimate prices of exotic options in a discrete-time model-free setting when the trader has access to market prices of a rich enough class of exotic and vanilla options. This is achieved by estimating an unobservable quantity called…
Mathematical models for financial asset prices which include, for example, stochastic volatility or jumps are incomplete in that derivative securities are generally not replicable by trading in the underlying. In earlier work (2004) the…
We prove a version of the fundamental theorem of asset pricing (FTAP) in continuous time that is based on the strict no-arbitrage condition and that is applicable to both frictionless markets and markets with proportional transaction costs.…
In this paper we will develop a methodology for obtaining pricing expressions for financial instruments whose underlying asset can be described through a simple continuous-time random walk (CTRW) market model. Our approach is very natural…
Backtests of cryptocurrency perpetual futures are fragile when they ignore microstructure frictions and reuse evaluation windows during parameter search. We study four liquid perpetuals (BTC/USDT, ETH/USDT, SOL/USDT, AVAX/USDT) and quantify…
Agricultural commodity futures are often settled by delivery. Quality options that allow the futures short to deliver one of several underlying assets are commonly used in such contracts to prevent manipulation. Inclusion of these options…
I analyze long-term contracting in insurance markets with asymmetric information. The buyer privately observes her risk type, which evolves stochastically over time. A long-term contract specifies a menu of insurance policies, contingent on…
Motivated by the Corns-Satchell, continuous time, option pricing model, we develop a binary tree pricing model with underlying asset price dynamics following It\^o-Mckean skew Brownian motion. While the Corns-Satchell market model is…
Display advertising has traditionally been sold via guaranteed contracts -- a guaranteed contract is a deal between a publisher and an advertiser to allocate a certain number of impressions over a certain period, for a pre-specified price…
Risk-neutral pricing dictates that the discounted derivative price is a martingale in a measure equivalent to the economic measure. The residual ambiguity for incomplete markets is here resolved by minimising the entropy of the price…
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…
We consider a nonlinear pricing environment with private information. We provide profit guarantees (and associated mechanisms) that the seller can achieve across all possible distributions of willingness to pay of the buyers. With a…
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…
Predictions of short-term directional movement of the futures contract can be challenging as its pricing is often based on multiple complex dynamic conditions. This work presents a method for predicting the short-term directional movement…