Related papers: Asset pricing under model uncertainty with discret…
We prove the superhedging duality for a discrete-time financial market with proportional transaction costs under model uncertainty. Frictions are modeled through solvency cones as in the original model of [Kabanov, Y., Hedging and…
This paper addresses the question of how an arbitrage-free semimartingale model is affected when stopped at a random horizon. We focus on No-Unbounded-Profit-with-Bounded-Risk (called NUPBR hereafter) concept, which is also known in the…
We present two models for incorporating the total effect of market microstructure noise into dynamic pricing of assets and European options. The first model is developed under a Black-Scholes-Merton, continuous-time framework. The second…
For several decades, the no-arbitrage (NA) condition and the martingale measures have played a major role in the financial asset's pricing theory. We propose a new approach for estimating the super-replication cost based on convex duality…
We study arbitrage opportunities, market viability and utility maximization in market models with an insider. Assuming that an economic agent possesses from the beginning an additional information in the form of a random variable G, which…
How to price and hedge claims on nontraded assets are becoming increasingly important matters in option pricing theory today. The most common practice to deal with these issues is to use another similar or "closely related" asset or index…
We generalize Merton's asset valuation approach to systems of multiple financial firms where cross-ownership of equities and liabilities is present. The liabilities, which may include debts and derivatives, can be of differing seniority. We…
A derivative is a financial security whose value is a function of underlying traded assets and market outcomes. Pricing a financial derivative involves setting up a market model, finding a martingale (``fair game") probability measure for…
We discuss the asymptotic behaviour of risk-based indifference prices of European contingent claims in discrete-time financial markets under volatility uncertainty as the number of intermediate trading periods tends to infinity. The…
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…
We develop a model to price inflation and interest rates derivatives using continuous-time dynamics that have some links with macroeconomic monetary DSGE models equipped with a Taylor rule: in particular, the reaction function of the…
We construct a statistical indicator for the detection of short-term asset price bubbles based on the information content of bid and ask market quotes for plain vanilla put and call options. Our construction makes use of the martingale…
We generalize classical results on the existence of optimal portfolios in discrete time frictionless market models to models with capital gains taxes. We consider the realistic but mathematically challenging rule that losses do not trigger…
We investigate pricing-hedging duality for American options in discrete time financial models where some assets are traded dynamically and others, e.g. a family of European options, only statically. In the first part of the paper we…
We introduce a new definition of speculative bubbles in discrete-time models based on the discounted stock price losing mass at some finite drop-down under an equivalent martingale measure. We provide equivalent probabilistic…
This work aims at a deeper understanding of the mathematical implications of the economically-sound condition of absence of arbitrages of the first kind in a financial market. In the spirit of the Fundamental Theorem of Asset Pricing…
We study time consistent dynamic pricing mechanisms of European contingent claims under uncertainty by using G framework introduced by Peng ([24]). We consider a financial market consisting of a riskless asset and a risky stock with price…
This short note provides a systematic construction of market models without unbounded profits but with arbitrage opportunities.
We consider an incomplete multi-asset binomial market model. We prove that for a wide class of contingent claims the extremal multi-step martingale measure is a power of the corresponding single-step extremal martingale measure. This allows…
A risk-neutral valuation framework is developed for pricing and hedging in-play football bets based on modelling scores by independent Poisson processes with constant intensities. The Fundamental Theorems of Asset Pricing are applied to…