A locally-built, LLM-digested index of recent arXiv papers in quant finance, geometry/topology, and statistical ML — keyword search served straight from SQLite on this machine.
The paper defines and implements risk-indifference pricing for American-style contingent claims.
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 bounded from below and above by the dynamic lower and upper hedging prices, resp…
In this article, we look at the effect of volatility clustering on the risk indifference price of options described by Sircar and Sturm in their paper (Sircar, R., & Sturm, S. (2012). From smile asymptotics to market risk measures. Mathematical Finance. Advance online publication. doi:10.1111/mafi.12015). The indiffere…
In this paper, we investigate risk minimization problem of derivatives based on non-tradable underlyings by means of dynamic g-expectations which are slight different from conditional g-expectations. In this framework, inspired by [1] and [16], we introduce risk indifference price, marginal risk price and derivative he…
We study convex risk measures describing the upper and lower bounds of a good deal bound, which is a subinterval of a no-arbitrage pricing bound. We call such a convex risk measure a good deal valuation and give a set of equivalent conditions for its existence in terms of market. A good deal valuation is characterized …
The paper uncovers the impact of price and payoff autocorrelations in multi-period asset pricing models.
Paper introduces benchmark-neutral pricing for long-term contracts.
We explore nature of price formation in financial markets and develop a theory of bid and ask price dynamics in which the two prices form due to quantum-chaotic interaction between buy and sell orders. In this model bid and ask prices are represented by eigenvalues of a 2x2 price operator corresponding to 'bid' and 'as…
New pricing algorithm learns demand curves and optimizes prices in dynamic markets.
In this paper we study dynamic pricing mechanisms of financial derivatives. A typical model of such pricing mechanism is the so-called g--expectation defined by solutions of a backward stochastic differential equation with g as its generating function. Black-Scholes pricing model is a special linear case of this pricin…
At the ultra high frequency level, the notion of price of an asset is very ambiguous. Indeed, many different prices can be defined (last traded price, best bid price, mid price,...). Thus, in practice, market participants face the problem of choosing a price when implementing their strategies. In this work, we propose …
Study utility indifference pricing in a Bachelier model with small linear price impact.
A pricing principle is introduced for non-attainable claims in incomplete markets.
Price without transaction makes no sense. Trading volume authenticates its corresponding price, so there exist mutual information and correlation between price and trading volume. We are curious about fractal features of this correlation and need to know how structures in different scales translate information. To expl…
Revisits behavioral finance option pricing model to align with rational asset pricing theory.
The paper extends option pricing theory for markets with informed traders.
How does dynamic price information flow among Northern European electricity spot prices and prices of major electricity generation fuel sources? We use time series models combined with new advances in causal inference to answer these questions. Applying our methods to weekly Nordic and German electricity prices, and oi…
Research predicts XRP price anomalies using graph topologies.
Path integral method calculates barrier option prices.
In this paper we apply active learning algorithms for dynamic pricing in a prominent e-commerce website. Dynamic pricing involves changing the price of items on a regular basis, and uses the feedback from the pricing decisions to update prices of the items. Most popular approaches to dynamic pricing use a passive learn…
A statistical decision problem is hidden in the core of option pricing. A simple form for the price C of a European call option is obtained via the minimum Bayes risk, R_B, of a 2-parameter estimation problem, thus justifying calling C Bayes (B-)price. The result provides new insight in option pricing, among others obt…
The paper addresses pricing interest rate derivatives in markets with volatility uncertainty.
The paper modifies asset pricing models using Taylor series expansions and market-based averages.
The paper reviews historical and modern approaches to asset pricing probability measures.
Introduces an unobservable intrinsic electricity price to link storage theory with risk premium.
It is well known how to determine the price of perpetual American options if the underlying stock price is a time-homogeneous diffusion. In the present paper we consider the inverse problem, that is, given prices of perpetual American options for different strikes, we show how to construct a time-homogeneous stock pric…
In our paper we analyze the relationship between the day-ahead electricity price of the Energy Exchange Austria (EXAA) and other day-ahead electricity prices in Europe. We focus on markets, which settle their prices after the EXAA, which enables traders to include the EXAA price into their calculations. For each market…
Data-driven method for option pricing using historical asset prices.
We derive behavioral finance option pricing formulas consistent with the rational dynamic asset pricing theory. In the existing behavioral finance option pricing formulas, the price process of the representative agent is not a semimartingale, which leads to arbitrage opportunities for the option seller. In the literatu…
Hamiltonian method applied to floating barrier options pricing.
Study compares price limit and circuit breaker effects in stock markets.
In a market with transaction costs, the price of a derivative can be expressed in terms of (preconsistent) price systems (after Kusuoka (1995)). In this paper, we consider a market with binomial model for stock price and discuss how to generate the price systems. From this, the price formula of a derivative can be refo…
Contracts for Difference (CfDs) are forwards on the spread between an area price and the system price. Together with the system price forwards, these products are used to hedge the area price risk in the Nordic electricity market. The CfDs are typically available for the next two months, three quarters and three years.…
We discuss the pricing methodology for Bonus Certificates and Barrier Reverse-Convertible Structured Products. Pricing for a European barrier condition is straightforward for products of both types and depends on an efficient interpolation of observed market option pricing. Pricing products We discuss the pricing metho…
The paper addresses fairness in dynamic pricing for strategic buyers.
Paper proposes a new method to compute cryptocurrency prices securely.
FINN learns option pricing and hedging using financial theory.
Derives pricing formulas for perpetual futures contracts.
Solves ambiguity in incomplete markets by minimizing price measure entropy.
Path integral method calculates PDBS option prices with time-dependent parameters.
The price of a stock will rarely follow the assumed model and a curious investor or a Regulatory Authority may wish to obtain a probability model the prices support. A risk neutral probability for the stock's price at time is determined in closed form from the prices before without assuming a price…
We consider the problem of finding a consistent upper price bound for exotic options whose payoff depends on the stock price at two different predetermined time points (e.g. Asian option), given a finite number of observed call prices for these maturities. A model-free approach is used, only taking into account that th…
Warrants with stock price dependent threshold conditions give the right to buy specially issued stocks, if the performance of the stock price satisfies some requirements. Existence of these derivatives changes the price process of the underlying. We show that in the presence of such warrants one cannot assume that the …
The paper shows that benchmark-neutral pricing minimizes option prices.
The paper examines how market trade values and volumes affect price autocorrelation.
This paper focuses on the pricing of continuous geometric Asian options (GAOs) under a multifactor stochastic volatility model. The model considers fast and slow mean reverting factors of volatility, where slow volatility factor is approximated by a quadratic arc. The asymptotic expansion of the price function is assum…
Trading bubbles form when traders adapt to price mismatches.
Paper proposes an analytical pricing model for puttable bonds with credit risk.