Related papers: Discrete time shadow price revisited
Simultaneous ascending auctions present agents with the exposure problem: bidding to acquire a bundle risks the possibility of obtaining an undesired subset of the goods. Auction theory provides little guidance for dealing with this…
The approach that allows find European option price on the assumption of hedging at discrete times is proposed. The routine allows find the option price not for lognormal distribution functions of underlying asset only but for wide enough…
A simple statement and accessible proof of a version of the Fundamental Theorem of Asset Pricing in discrete time is provided. Careful distinction is made between prices and cash flows in order to provide uniform treatment of all…
We develop theory and applications of forward characteristic processes in discrete time following a seminal paper of Jan Kallsen and Paul Kr\"uhner. Particular emphasis is placed on the dynamics of volatility surfaces which can be easily…
This paper investigates the equilibrium portfolio selection for smooth ambiguity preferences in a continuous-time market. The investor is uncertain about the risky asset's drift term and updates the subjective belief according to the…
We consider the problem of optimal trading for a power producer in the context of intraday electricity markets. The aim is to minimize the imbalance cost induced by the random residual demand in electricity, i.e. the consumption from the…
With the increasing use of auctions in online advertising, there has been a large effort to study seller revenue maximization, following Myerson's seminal work, both theoretically and practically. We take the point of view of the buyer in…
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…
As markets have digitized, the number of tradable products has skyrocketed. Algorithmically constructed portfolios of these assets now dominate public and private markets, resulting in a combinatorial explosion of tradable assets. In this…
We develop two alternate approaches to arbitrage-free, market-complete, option pricing. The first approach requires no riskless asset. We develop the general framework for this approach and illustrate it with two specific examples. The…
Discretely sampled variance and volatility swaps trade actively in OTC markets. To price these swaps, the continuously sampled approximation is often used to simplify the computations. The purpose of this paper is to study the conditions…
Statistical arbitrage exploits temporal price differences between similar assets. We develop a unifying conceptual framework for statistical arbitrage and a novel data driven solution. First, we construct arbitrage portfolios of similar…
We propose and analyze differentially private (DP) mechanisms for call auctions as an alternative to the complex and ad-hoc privacy efforts that are common in modern electronic markets. We prove that the number of shares cleared in the DP…
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…
Several models for the pricing of derivative securities in illiquid markets are discussed. A typical type of nonlinear partial differential equations arising from these investigation is studied. The scaling properties of these equations are…
This paper develops a strategic model of trade between two regions in which, depending on the relation among output, financial resources and transportation costs, the adjustment of prices towards an equilibrium is studied. We derive…
We consider a general discrete-time financial market with proportional transaction costs as in [Kabanov, Stricker and R\'{a}sonyi Finance and Stochastics 7 (2003) 403--411] and [Schachermayer Math. Finance 14 (2004) 19--48]. In addition to…
We present an arbitrage free theoretical framework for modeling bid and ask prices of dividend paying securities in a discrete time setup using theory of dynamic acceptability indices. In the first part of the paper we develop the theory of…
We address the problem of asset pricing in a market where there is no risky asset. Previous work developed a theoretical model for a shadow riskless rate (SRR) for such a market in terms of the drift component of the state-price deflator…
Bidding in simultaneous auctions is challenging because an agent's value for a good in one auction may depend on the uncertain outcome of other auctions: the so-called exposure problem. Given the gap in understanding of general simultaneous…