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Trailing stop is a popular stop-loss trading strategy by which the investor will sell the asset once its price experiences a pre-specified percentage drawdown. In this paper, we study the problem of timing buy and then sell an asset subject…
An unconventional approach for optimal stopping under model ambiguity is introduced. Besides ambiguity itself, we take into account how ambiguity-averse an agent is. This inclusion of ambiguity attitude, via an $\alpha$-maxmin nonlinear…
The aim of this short note is to present a solution to the discrete time exponential utility maximization problem in a case where the underlying asset has a multivariate normal distribution. In addition to the usual setting considered in…
In this paper we investigate the local risk-minimization approach for a semimartingale financial market where there are restrictions on the available information to agents who can observe at least the asset prices. We characterize the…
This paper investigates a time-inconsistent portfolio selection problem in the incomplete mar ket model, integrating expected utility maximization with risk control. The objective functional balances the expected utility and variance on log…
We study risk-sharing economies where heterogenous agents trade subject to quadratic transaction costs. The corresponding equilibrium asset prices and trading strategies are characterised by a system of nonlinear, fully-coupled…
We give a complete solution to the problem of minimizing the expected liquidity costs in presence of a general drift when the underlying market impact model has linear transient price impact with exponential resilience. It turns out that…
In this paper we study the Kyle-Back strategic insider trading equilibrium model in which the insider has an instantaneous information on an asset, assumed to follow an Ornstein-Uhlenback-type dynamics that allows possible influence by the…
Given two probability measures on sequential data, we investigate the transport problem with time-inconsistent preferences in a discrete-time setting. Motivating examples are nonlinear objectives, state-dependent costs, and regularized…
We propose a continuous-time model of trading with heterogeneous beliefs. Risk-neutral agents face quadratic costs-of-carry on positions and thus their marginal valuations decrease with the size of their position, as it would be the case…
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…
We investigate how price variations of a stock are transformed into profits and losses (P&Ls) of a trend following strategy. In the frame of a Gaussian model, we derive the probability distribution of P&Ls and analyze its moments (mean,…
We study how trading costs are reflected in equilibrium returns. To this end, we develop a tractable continuous-time risk-sharing model, where heterogeneous mean-variance investors trade subject to a quadratic transaction cost. The…
This paper presents an optimal allocation problem in a financial market with one risk-free and one risky asset, when the market is driven by a stochastic market price of risk. We solve the problem in continuous time, for an investor with a…
In speculative markets, risk-free profit opportunities are eliminated by traders exploiting them. Markets are therefore often described as "informationally efficient", rapidly removing predictable price changes, and leaving only residual…
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 consider optimal design of infinite-dimensional Bayesian linear inverse problems governed by partial differential equations that contain secondary reducible model uncertainties, in addition to the uncertainty in the inversion parameters.…
Departing from the dominant approach focused on individual and meso-level determinants, this paper develops a macroeconomic formalization of job insecurity within a New Keynesian framework in which the standard IS-NKPC-Taylor rule block is…
We introduce an equilibrium asset pricing model, which we build on the relationship between a novel risk measure, the Expected Downside Risk (EDR) and the expected return. On the one hand, our proposed risk measure uses a nonparametric…
We study the formation of derivative prices in equilibrium between risk-neutral agents with heterogeneous beliefs about the dynamics of the underlying. Under the condition that the derivative cannot be shorted, we prove the existence of a…