Related papers: Collective completeness and pricing hedging dualit…
Although machine learning approaches have been widely used in the field of finance, to very successful degrees, these approaches remain bespoke to specific investigations and opaque in terms of explainability, comparability, and…
We propose a constructive framework for the super-hedging problem of a European contingent claim under proportional transaction costs in discrete time. Our main contribution is an explicit recursive scheme that computes both the…
In this work, we develop an equilibrium model for price formation of securities in a market composed of two populations of different types: the first one consists of cooperative agents, while the other one consists of non-cooperative…
The classical discrete time model of proportional transaction costs relies on the assumption that a feasible portfolio process has solvent increments at each step. We extend this setting in two directions, allowing for convex transaction…
We consider a financial market with one riskless and one risky asset. The super-replication theorem states that there is no duality gap in the problem of super-replicating a contingent claim under transaction costs and the associated dual…
Pair trading is one of the most effective statistical arbitrage strategies which seeks a neutral profit by hedging a pair of selected assets. Existing methods generally decompose the task into two separate steps: pair selection and trading.…
We consider portfolio selection under nonparametric $\alpha$-maxmin ambiguity in the neighbourhood of a reference distribution. We show strict concavity of the portfolio problem under ambiguity aversion. Implied demand functions are…
We price and replicate a variety of claims written on the log price $X$ and quadratic variation $[X]$ of a risky asset, modeled as a positive semimartingale, subject to stochastic volatility and jumps. The pricing and hedging formulas do…
In a model with no given probability measure, we consider asset pricing in the presence of frictions and other imperfections and characterize the property of coherent pricing, a notion related to (but much weaker than) the no arbitrage…
In a stochastic volatility framework, we find a general pricing equation for the class of payoffs depending on the terminal value of a market asset and its final quadratic variation. This allows a pricing tool for European-style claims…
We study the problem of super-replication for game options under proportional transaction costs. We consider a multidimensional continuous time model, in which the discounted stock price process satisfies the conditional full support…
We introduce a new model for pricing corporate bonds, which is a modification of the classical model of Merton. In this new model, we drop the liquidity assumption of the firm's asset value process, and assume that there is a liquidly…
In this note, we consider a general discrete time financial market with proportional transaction costs as in Kabanov and Stricker (2001), Kabanov et al. (2002), Kabanov et al. (2003) and Schachermayer (2004). We provide a dual formulation…
Market makers provide liquidity to other market participants: they propose prices at which they stand ready to buy and sell a wide variety of assets. They face a complex optimization problem with both static and dynamic components. They…
We study asset price bubbles in market models with proportional transaction costs $\lambda\in (0,1)$ and finite time horizon $T$ in the setting of [49]. By following [28], we define the fundamental value $F$ of a risky asset $S$ as the…
We introduce a two-agent problem which is inspired by price asymmetry arising from funding difference. When two parties have different funding rates, the two parties deduce different fair prices for derivative contracts even under the same…
We discuss a method for predicting financial movements and finding pockets of predictability in the price-series, which is built around inferring the heterogeneity of trading strategies in a multi-agent trader population. This work explores…
In the frictionless discrete time financial market of Bouchard and Nutz (2015), we propose a full characterization of the quasi-sure super-replication price: as the supremum of the mono-prior super-replication prices, through an extreme…
We consider a class of generalized capital asset pricing models in continuous time with a finite number of agents and tradable securities. The securities may not be sufficient to span all sources of uncertainty. If the agents have…
This paper examines replication portfolio construction in incomplete markets - a key problem in financial engineering with applications in pricing, hedging, balance sheet management, and energy storage planning. We model this as a…