Related papers: Collective completeness and pricing hedging dualit…
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 construct and study market models admitting optimal arbitrage. We say that a model admits optimal arbitrage if it is possible, in a zero-interest rate setting, starting with an initial wealth of 1 and using only positive portfolios, to…
Background: For complex financial systems, the negative and positive return-volatility correlations, i.e., the so-called leverage and anti-leverage effects, are particularly important for the understanding of the price dynamics. However,…
Bielecki and Rutkowski (2014) introduced and studied a generic nonlinear market model, which includes several risky assets, multiple funding accounts and margin accounts. In this paper, we examine the pricing and hedging of contract both…
We study super--replication of contingent claims in markets with fixed transaction costs. This can be viewed as a stochastic impulse control problem with a terminal state constraint. The first result in this paper reveals that in reasonable…
The idea of this paper is an advanced game concept. This concept is expected to model non-monetary bilateral cooperations between self-interested agents. Such non-monetary cases are social cooperations like allocation of high level jobs or…
Let $X^1,\ldots, X^d$ be sigma-martingales on $(\Omega,{\cal F}, P)$. We show that every bounded martingale (with respect to the underlying filtration) admits an integral representation w.r.t. $X^1,\ldots, X^d$ if and only if there is no…
We consider the problem of belief aggregation: given a group of individual agents with probabilistic beliefs over a set of uncertain events, formulate a sensible consensus or aggregate probability distribution over these events. Researchers…
We study a notion of good-deal hedging, that corresponds to good-deal valuation for generalized good-deal constraints. Under model uncertainty about the market prices of risk of hedging assets, a robust approach leads to a reduction or even…
In the paper a problem of risk measures on a discrete-time market model with transaction costs is studied. Strategy effectiveness and shortfall risk is introduced. This paper is a generalization of quantile hedging presented in [4].
We investigate the problem of pricing and hedging derivatives of Electricity Futures contract when the underlying asset is not available. We propose to use a cross hedging strategy based on the Futures contract covering the larger delivery…
Bielecki and Rutkowski (2014) introduced and studied a generic nonlinear market model, which includes several risky assets, multiple funding accounts and margin accounts. In this paper, we examine the pricing and hedging of contract both…
The introduction of leverage on prediction-market event contracts raises three structurally distinct questions that have not been addressed jointly: how leverage changes manipulation incentives, how it interacts with informed-trading rents,…
Bipartite matching, where agents on one side of a market are matched to agents or items on the other, is a classical problem in computer science and economics, with widespread application in healthcare, education, advertising, and general…
We study a continuous-time financial market with continuous price processes under model uncertainty, modeled via a family $\mathcal{P}$ of possible physical measures. A robust notion ${\rm NA}_{1}(\mathcal{P})$ of no-arbitrage of the first…
This paper develops a model-free framework for static fixed-income pricing and the replication of liability cash flows. We show that the absence of static arbitrage across a universe of fixed-income instruments is equivalent to the…
Although both data availability and the demand for accurate forecasts are increasing, collaboration between stakeholders is often constrained by data ownership and competitive interests. In contrast to recent proposals within cooperative…
We introduce a discrete binary tree for pricing contingent claims with the underlying security prices exhibiting history dependence characteristic of that induced by market microstructure phenomena. Example dependencies considered include…
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 propose a decentralized market model in which agents can negotiate bilateral contracts. This builds on a similar, but centralized, model of trading networks introduced by Hatfield et al. in 2013. Prior work has established that…