Related papers: Price systems for markets with transaction costs a…
Employing probabilistic techniques we compute best possible upper and lower bounds on the price of an option on one or two assets with continuous piecewise linear payoff function based on prices of simple call options of possibly distinct…
This paper studies pricing derivatives in an age-dependent semi-Markov modulated market. We consider a financial market where the asset price dynamics follow a regime switching geometric Brownian motion model in which the coefficients…
A new chaotic financial system is proposed by considering ethics involvement in a four-dimensional financial system with market confidence. A five-dimensional conformable derivative financial system is presented by introducing conformable…
The present paper proposes a new framework for describing the stock price dynamics. In the traditional geometric Brownian motion model and its variants, volatility plays a vital role. The modern studies of asset pricing expand around…
The use of kinetic modelling based on partial differential equations for the dynamics of stock price formation in financial markets is briefly reviewed. The importance of behavioral aspects in market booms and crashes and the role of…
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…
The multidimensional Uncertain Volatility Model leads to robust option pricing problems under joint volatility and correlation uncertainty. Their numerical resolution quickly becomes challenging because the associated stochastic control…
We propose a general approximation method for determining optimal trading strategies in markets with proportional transaction costs, with a polynomial approximation of the residual value function. The method is exemplified by several…
Pricing financial or real options with arbitrary payoffs in regime-switching models is an important problem in finance. Mathematically, it is to solve, under certain standard assumptions, a general form of optimal stopping problems in…
We use standard physics techniques to model trading and price formation in a market under the assumption that order arrival and cancellations are Poisson random processes. This model makes testable predictions for the most basic properties…
Using tools from spectral analysis, singular and regular perturbation theory, we develop a systematic method for analytically computing the approximate price of a derivative-asset. The payoff of the derivative-asset may be path-dependent.…
A common assumption in financial engineering is that the market price for any derivative coincides with an objectively defined risk-neutral price - a plausible assumption only if traders collectively possess objective knowledge about the…
A new model for stocks markets using integer values for each stock price is presented. In contrast with previously reported models, the variables used in the model are not of binary type, but of more general integer type. It is shown how…
We consider stochastic volatility models under parameter uncertainty and investigate how model derived prices of European options are affected. We let the pricing parameters evolve dynamically in time within a specified region, and…
An efficient computational algorithm to price financial derivatives is presented. It is based on a path integral formulation of the pricing problem. It is shown how the path integral approach can be worked out in order to obtain fast and…
We present a methodology for representing probabilistic relationships in a general-equilibrium economic model. Specifically, we define a precise mapping from a Bayesian network with binary nodes to a market price system where consumers and…
We introduce signature payoffs, a family of path-dependent derivatives that are given in terms of the signature of the price path of the underlying asset. We show that these derivatives are dense in the space of continuous payoffs, a result…
We develop a fundamentally different stochastic dynamic programming model of trading costs. Built on a strong theoretical foundation, our model provides insights to market participants by splitting the overall move of the security price…
Dynamic pricing schemes were introduced as an alternative to posted-price mechanisms. In contrast to static models, the dynamic setting allows to update the prices between buyer-arrivals based on the remaining sets of items and buyers, and…
We investigate possible origins of trends using a deterministic threshold model, where we refer to long-term variabilities of price changes (price movements) in financial markets as trends. From the investigation we find two phenomena. One…