Related papers: Collective completeness and pricing hedging dualit…
In a continuous-time model with multiple assets described by c\`{a}dl\`{a}g processes, this paper characterizes superhedging prices, absence of arbitrage, and utility maximizing strategies, under general frictions that make execution prices…
We present a semi-static hedging algorithm for callable interest rate derivatives under an affine, multi-factor term-structure model. With a traditional dynamic hedge, the replication portfolio needs to be updated continuously through time…
We provide a practical superhedging strategy for the pricing and hedging of the No-Negative-Equity-Guarantee (NNEG) found in Equity-Release Mortgages (ERMs), or reverse mortgages, using a discrete-time model. In contrast to many papers on…
We discuss how minimal financial market models can be constructed by bridging the gap between two existing, but incomplete, market models: a model in which a population of virtual traders make decisions based on common global information…
In this study, we developed a computational framework for simulating large-scale agent-based financial markets. Our platform supports trading multiple simultaneous assets and leverages distributed computing to scale the number and…
We extend the fundamental theorem of asset pricing to a model where the risky stock is subject to proportional transaction costs in the form of bid-ask spreads and the bank account has different interest rates for borrowing and lending. We…
In the past decades, advanced probabilistic methods have had significant impact on the field of finance, both in academia and in the financial industry. Conversely, financial questions have stimulated new research directions in probability.…
The principal portfolios of the standard Capital Asset Pricing Model (CAPM) are analyzed and found to have remarkable hedging and leveraging properties. Principal portfolios implement a recasting of any correlated asset set of N risky…
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…
The recent "correlation breakdown" in the modeling of credit default swaps, in which model correlations had to exceed 100% in order to reproduce market prices of supersenior tranches, is analyzed and argued to be a fundamental market…
This paper studies the equal risk pricing (ERP) framework for the valuation of European financial derivatives. This option pricing approach is consistent with global trading strategies by setting the premium as the value such that the…
Prediction markets are long known for prediction accuracy. This study systematically explores the fundamental properties of prediction markets, addressing questions about their information aggregation process and the factors contributing to…
This study strengthens the foundations of multi-venue market modeling by attempting an independent replication of Wah and Wellman's 2016 model of latency arbitrage in a fragmented market. We find that faithful replication is hindered by…
In the context of an incomplete market with a Brownian filtration and a fixed finite time horizon, this paper proves that for general dynamic convex risk measures, the buyer's and seller's risk indifference prices of a contingent claim are…
We show that the results of ArXiv:1305.6008 on the Fundamental Theorem of Asset Pricing and the super-hedging theorem can be extended to the case in which the options available for static hedging (\emph{hedging options}) are quoted with…
We propose a novel framework that computes the corrective control efforts to ensure joint safety in multi-agent dynamical systems. This framework efficiently distributes the required corrective effort without revealing individual agents'…
We introduce a new class of combinatorial markets in which agents have covering constraints over resources required and are interested in delay minimization. Our market model is applicable to several settings including scheduling, cloud…
Adachi and Ryu introduced a category Prob of probability spaces whose objects are all probability spaces and whose arrows correspond to measurable functions satisfying an absolutely continuous requirement in [Adachi and Ryu, 2019]. In this…
We introduce a setup of model uncertainty in discrete time. In this setup we derive dual expressions for the super--replication prices of game options with upper semicontinuous payoffs. We show that the super--replication price is equal to…
In this paper, we obtain a duality result for the exponential utility maximization problem where trading is subject to quadratic transaction costs and the investor is required to liquidate her position at the maturity date. As an…