We study the exponential utility indifference valuation of a contingent claim B in an incomplete market driven by two Brownian motions. The claim depends on a nontradable asset stochastically correlated with the traded asset available for hedging. We use martingale arguments to provide upper and...

This paper studies modelling and existence issues for market models of option prices in a continuous-time framework with one stock, one bond and a family of European call options for one fixed maturity and all strikes. After arguing that (classical) implied volatilities are ill-suited for...

This paper studies modelling and existence issues for market models of stochastic implied volatility in a continuous-time framework with one stock, one bank account and a family of European options for all maturities with a fixed payoff function h. We first characterize absence of arbitrage in...

We study the dynamic utility indifference value process p(X) when the usefulness of X is evaluated via a dynamic monetary concave utility functional (DMCUF) instead of von Neumann/Morgenstern expected utility. A DMCUF is minus a dynamic convex risk measure. The key tools for our investigations...

We develop intuitive expressions for the spread between a forwardcontract and a similar futures contract taking into account the pos-sibility of counterparty default. We evaluate these expressions nu-merically and show that the forward-futures spread is significant forrealistic parameter...

Most derivative contracts are traded over-the-counter, i.e., bilaterally between two counterparties. Recently, clearing services have become available that allow to transfer over-the-counter derivatives to a central counterparty (clearing house). We develop a framework to determine the effects...