Related papers: Dynamic Asset Pricing Theory for Life Contingent R…
Since most of the traded options on individual stocks is of American type it is of interest to generalize the results obtained in semi-static trading to the case when one is allowed to statically trade American options. However, this…
This note continues investigation of randomness-type properties emerging in idealized financial markets with continuous price processes. It is shown, without making any probabilistic assumptions, that the strong variation exponent of…
In complete markets, there are risky assets and a riskless asset. It is assumed that the riskless asset and the risky asset are traded continuously in time and that the market is frictionless. In this paper, we propose a new method for…
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…
The relationship between price volatilty and a market extremum is examined using a fundamental economics model of supply and demand. By examining randomness through a microeconomic setting, we obtain the implications of randomness in the…
In this paper we propose a new model for pricing stock and dividend derivatives. We jointly specify dynamics for the stock price and the dividend rate such that the stock price is positive and the dividend rate non-negative. In its simplest…
This paper proposes a dynamic valuation framework to determine the opportunity value of battery capacity degradation in grid applications based on the internal degradation mechanism and utilization scenarios. The proposed framework follows…
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…
The stochastic multi-armed bandit has provided a framework for studying decision-making in unknown environments. We propose a variant of the stochastic multi-armed bandit where the rewards are sampled from a stochastic linear dynamical…
In this paper the multivariate fractional trading ansatz of money management from Ralph Vince (Portfolio Management Formulas: Mathematical Trading Methods for the Futures, Options, and Stock Markets, John Wiley & Sons, Inc., 1990) is…
Portfolio theory is a very powerful tool in the modern investment theory. It is helpful in estimating risk of an investor's portfolio, which arises from our lack of information, uncertainty and incomplete knowledge of reality, which forbids…
Portfolio Selection is an important real-world financial task and has attracted extensive attention in artificial intelligence communities. This task, however, has two main difficulties: (i) the non-stationary price series and complex asset…
We consider the problem of dynamic pricing with limited supply. A seller has $k$ identical items for sale and is facing $n$ potential buyers ("agents") that are arriving sequentially. Each agent is interested in buying one item. Each…
This paper introduces a new methodology for constructing a network of companies called a dynamic asset graph. This is similar to the dynamic asset tree studied recently, as both are based on correlations between asset returns. However, the…
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…
This paper develops a continuous-time filtering framework for estimating a hazard rate subject to an unobservable change-point. This framework naturally arises in both financial and insurance applications, where the default intensity of a…
In a discrete-time market, we study model-independent superhedging, while the semi-static superhedging portfolio consists of {\it three} parts: static positions in liquidly traded vanilla calls, static positions in other tradable, yet…
This paper studies convex duality in optimal investment and contingent claim valuation in markets where traded assets may be subject to nonlinear trading costs and portfolio constraints. Under fairly general conditions, the dual expressions…
This review summarizes the historical development of probability measures in asset pricing, from early mathematical finance and state price theory to risk-neutral valuation, martingale measures, forward measures, stochastic discount…
We consider infinite dimensional optimization problems motivated by the financial model called Arbitrage Pricing Theory. Using probabilistic and functional analytic tools, we provide a dual characterization of the super-replication cost.…