We study the problem of optimally hedging exotic derivatives positions using a combination of dynamic trading strategies in underlying stocks and static positions in vanilla options when the performance is quantified by a convex risk measure. We establish conditions for the existence of an...

We consider an investor who maximizes expected exponential utility of terminal wealth, combining a static position in derivative securities with a traditional dynamic trading strategy in stocks. Our main result, obtained by studying the strict concavity of the utility-indifference price as a...

This paper considers arbitrage-free option pricing in the presence of large agents. These large agents have a significant market power, and their trading strategies influence the dynamics of the financial asset prices. First, a simple asset pricing model in the presence of large agents is...

Coarse woody debris (CWD) is crucial for maintaining biodiversity in forests but conservation measures to increase CWD must be performed cost efficiently. We estimate least-cost combinations of CWD-increasing measures in a spruce-dominated Swedish forest estate. Specifically, we investigate how...

Optimal trading strategies are found for an insider who is trading in two convergent stocks and is bound by margin constraints.

We investigate the partial hedging problem in financial markets with a large agent. An agent is said to be large if his/her trades influence the equilibrium price. We develop a stochastic differential equation (SDE) with a single large agent parameter to model such a market. We focus on...

Volatility products have become popular in the past 15 years as a hedge against market uncertainty. In particular, there is growing interest in options on the VIX volatility index. A number of recent empirical studies have examine whether there is significantly greater risk premium in VIX...

This paper studies the effect of introducing stochastic volatility in the first-passage structural approach to default risk. The impact of volatility time scales on the yield spread curve is analyzed. In particular it is shown that the presence of a short time scale in the volatility raises the...

The skew effect in market implied volatility can be reproduced by option pricing theory based on stochastic volatility models for the price of the underlying asset. Here we study the performance of the calibration of the S&P 500 implied volatility surface using the asymptotic pricing theory...