Related papers: Real-world models for multiple term structures: a …
Developments in finance industry and academic research has led to innovative financial products. This paper presents an alternative approach to price American options. Our approach utilizes famous \cite{heath1992bond} ("HJM") technique to…
Derivative hedging and pricing are important and continuously studied topics in financial markets. Recently, deep hedging has been proposed as a promising approach that uses deep learning to approximate the optimal hedging strategy and can…
This papers addresses the stock option pricing problem in a continuous time market model where there are two stochastic tradable assets, and one of them is selected as a num\'eraire. It is shown that the presence of arbitrarily small…
In this paper a unifying energy-based approach is provided to the modeling and stability analysis of power systems coupled with market dynamics. We consider a standard model of the power network with a third-order model for the synchronous…
In this paper we investigate the local risk-minimization approach for a combined financial-insurance model where there are restrictions on the information available to the insurance company. In particular we assume that, at any time, the…
Pricing interest-rate financial derivatives is a major problem in finance, in which it is crucial to accurately reproduce the time-evolution of interest rates. Several stochastic dynamics have been proposed in the literature to model either…
We study long-term growth-optimal strategies on a simple market with linear proportional transaction costs. We show that several problems of this sort can be solved in closed form, and explicit the non-analytic dependance of optimal…
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…
Within a general semimartingale framework, we study the relationship between collective market efficiency and individual rationality. We derive a necessary and sufficient condition for the existence of (possibly zero-sum) exchanges among…
This paper deals with forward performances of HARA type. Precisely, for a market model in which stock price processes are modeled by a locally bounded $d$-dimensional semimartingale, we elaborate a complete and explicit characterization for…
Rough stochastic volatility models have attracted a lot of attentions recently, in particular for the linear option pricing problem. In this paper, starting with power utilities, we propose to use a martingale distortion representation of…
In this paper we provide a quantitative analysis to the concept of arbitrage, that allows to deal with model uncertainty without imposing the no-arbitrage condition. In markets that admit ``small arbitrage", we can still make sense of the…
The paper develops general, discrete, non-probabilistic market models and minmax price bounds leading to price intervals for European options. The approach provides the trajectory based analogue of martingale-like properties as well as a…
SABR models have been used to incorporate stochastic volatility to LIBOR market models (LMM) in order to describe interest rate dynamics and price interest rate derivatives. From the numerical point of view, the pricing of derivatives with…
We propose a multifractal model for short-term interest rates. The model is a version of the Markov-Switching Multifractal (MSM), which incorporates the well-known level effect observed in interest rates. Unlike previously suggested models,…
We consider the problem of optimal consumption of multiple goods in incomplete semimartingale markets. We formulate the dual problem and identify conditions that allow for existence and uniqueness of the solution and give a characterization…
In academic literature portfolio risk management and hedging are often versed in the language of stochastic control and Hamilton--Jacobi--Bellman~(HJB) equations in continuous time. In practice the continuous-time framework of stochastic…
We introduce a new and highly tractable structural model for spot and derivative prices in electricity markets. Using a stochastic model of the bid stack, we translate the demand for power and the prices of generating fuels into electricity…
We propose a model to quantify the effect of parameter uncertainty on the option price in the Heston model. More precisely, we present a Hamilton-Jacobi-Bellman framework which allows us to evaluate best and worst case scenarios under an…
We introduce a fairly general, recombining trinomial tree model in the natural world. Market-completeness is ensured by considering a market consisting of two risky assets, a riskless asset, and a European option. The two risky assets…