Related papers: Asset pricing under model uncertainty with discret…
In this paper, we consider the discrete-time setting, and the market model described by (S,F,T)$. Herein F is the ``public" flow of information which is available to all agents overtime, S is the discounted price process of d-tradable…
We consider a one-period market model composed by a risk-free asset and a risky asset with $n$ possible future values (namely, a $n$-nomial market model). We characterize the lower envelope of the class of equivalent martingale measures in…
This paper studies the equilibrium price of an asset that is traded in continuous time between N agents who have heterogeneous beliefs about the state process underlying the asset's payoff. We propose a tractable model where agents maximize…
It is shown that absence of arbitrage opportunity in financial markets is a particular case of existence of uncertainty in decision system. Absence of arbitrage opportunity is considered in the sense of the Arrow-Debreu model of financial…
This paper presents a discrete--time equity derivatives pricing model with default risk in a no--arbitrage framework. Using the equity--credit reduced form approach where default intensity mainly depends on the firm's equity value, we…
In this paper we derive robust super- and subhedging dualities for contingent claims that can depend on several underlying assets. In addition to strict super- and subhedging, we also consider relaxed versions which, instead of eliminating…
Machine learning is central to empirical asset pricing, but portfolio construction still relies on point predictions and largely ignores asset-specific estimation uncertainty. We propose a simple change: sort assets using…
We consider the pricing of American put options in a model-independent setting: that is, we do not assume that asset prices behave according to a given model, but aim to draw conclusions that hold in any model. We incorporate market…
We consider dynamic sublinear expectations (i.e., time-consistent coherent risk measures) whose scenario sets consist of singular measures corresponding to a general form of volatility uncertainty. We derive a c\`adl\`ag nonlinear…
The paper studies derivative asset analysis in structural credit risk models where the asset value of the firm is not fully observable. It is shown that in order to compute the price dynamics of traded securities one needs to solve a…
A simple statement and accessible proof of a version of the Fundamental Theorem of Asset Pricing in discrete time is provided. Careful distinction is made between prices and cash flows in order to provide uniform treatment of all…
In this paper a finite discrete time market with an arbitrary state space and bid-ask spreads is considered. The notion of an equivalent bid-ask martingale measure (EBAMM) is introduced and the fundamental theorem of asset pricing is proved…
As operators acting on the undetermined final settlement of a derivative security, expectation is linear but price is non-linear. When the market of underlying securities is incomplete, non-linearity emerges from the bid-offer around the…
In a model free discrete time financial market, we prove the superhedging duality theorem, where trading is allowed with dynamic and semi-static strategies. We also show that the initial cost of the cheapest portfolio that dominates a…
We consider a multi-asset incomplete model of the financial market, where each of $m\geq 2$ risky assets follows the binomial dynamics, and no assumptions are made on the joint distribution of the risky asset price processes. We provide…
We develop a behavioral asset pricing model in which agents trade in a market with information friction. Profit-maximizing agents switch between trading strategies in response to dynamic market conditions. Due to noisy private information…
We study hedging and pricing of unattainable contingent claims in a non-Markovian regime-switching financial model. Our financial market consists of a bank account and a risky asset whose dynamics are driven by a Brownian motion and a…
We obtain an exact necessary and sufficient condition for the existence and uniqueness of equilibrium asset prices in infinite horizon, discrete-time, arbitrage free environments. Through several applications we show how the condition…
We consider a dynamic market model of liquidity where unmatched buy and sell limit orders are stored in order books. The resulting net demand surface constitutes the sole input to the model. We prove that generically there is no arbitrage…
The target of this paper is to consider model the risky asset price on the financial market under the Knightian uncertainty, and pricing the ask and bid prices of the uncertain risk. We use the nonlinear analysis tool, i.e., G-frame work…