Related papers: Dynamic Asset Pricing Theory for Life Contingent R…
This paper studies the pricing of contingent claims of American style, using indifference pricing by fully dynamic convex risk measures. We provide a general definition of risk-indifference prices for buyers and sellers in continuous time,…
We study portfolio selection in a complete continuous-time market where the preference is dictated by the rank-dependent utility. As such a model is inherently time inconsistent due to the underlying probability weighting, we study the…
We propose a Fundamental Theorem of Asset Pricing and a Super-Replication Theorem in a model-independent framework. We prove these theorems in the setting of finite, discrete time and a market consisting of a risky asset S as well as…
In life insurance, life tables are used to estimate the survival distribution of individuals from a given population. However, these tables only provide survival probabilities at integer ages but no information about the distribution of…
The Capital Asset Pricing Model (CAPM) relates a well-diversified stock portfolio to a benchmark portfolio. We insert size effect in CAPM, capturing the observation that small stocks have higher risk and return than large stocks, on…
Assuming frictionless trading, classical stochastic portfolio theory (SPT) provides relative arbitrage strategies. However, the costs associated with real-world execution are state-dependent, volatile, and under increasing stress during…
Although the CML (Capital Market Line), the Intertemporal-CAPM, the CAPM/SML (Security Market Line) and the Intertemporal Arbitrage Pricing Theory (IAPT) are widely used in portfolio management, valuation and capital markets financing;…
We consider a financial market where stocks are available for dynamic trading, and European and American options are available for static trading (semi-static trading strategies). We assume that the American options are infinitely…
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…
We investigate a statistical-static hedging technique for pricing assets considered as single-step stochastic cash flows. The valuation is based on constructing in a canonical way a European style derivative on a benchmark security such…
We study the problem of determination of asset prices in an incomplete market proposing three different but related scenarios. One scenario uses a market game approach whereas the other two are based on risk sharing or regret minimizing…
We call an investment strategy survival, if an agent who uses it maintains a non-vanishing share of market wealth over the infinite time horizon. In a discrete-time multi-agent model with endogenous asset prices determined through a…
In this paper we develop a theory of general selection systems with discrete time and explore the evolution of selection systems, in particular, inhomogeneous populations. We show that the knowledge of the initial distribution of the…
In this paper we provide a comprehensive analysis of a structural model for the dynamics of prices of assets traded in a market originally proposed in [1]. The model takes the form of an interacting generalization of the geometric Brownian…
Non-equilibrium phenomena occur not only in physical world, but also in finance. In this work, stochastic relaxational dynamics (together with path integrals) is applied to option pricing theory. A recently proposed model (by Ilinski et…
This paper proposes a paradigm shift in the valuation of long term annuities, away from classical no-arbitrage valuation towards valuation under the real world probability measure. Furthermore, we apply this valuation method to two examples…
We consider the terminal wealth utility maximization problem from the point of view of a portfolio manager who is paid by an incentive scheme, which is given as a convex function $g$ of the terminal wealth. The manager's own utility…
As operators acting on the undetermined final settlement of a derivative security, expectation is linear but price is non-linear. When the market of underlying securities is incomplete, non-linearity emerges from the bid-offer around the…
This paper does not suppose a priori that the evolution of the price of a financial asset is a semimartingale. Since possible strategies of investors are self-financing, previous prices are forced to be finite quadratic variation processes.…
This paper formulates a model of utility for a continuous time framework that captures the decision-maker's concern with ambiguity about both volatility and drift. Corresponding extensions of some basic results in asset pricing theory are…