We consider a multivariate financial market with proportional transaction costs as in Kabanov (1999). We study the problem of contingent claim pricing via utility maximization as in Hodges and Neuberger (1989). Using an exponential utility function, we derive a closed form characterization for...

We consider a financial market with costs as in Kabanov and Last (1999). Given a utility function defined on ${\mathbb R}$, we analyze the problem of maximizing the expected utility of the liquidation value of terminal wealth diminished by some random claim. We prove that, under the Reasonable...

This work consists of two parts. In the first one, we study a model where the assets are investment opportunities, which are completely described by their cash-flows. Those cash-flows follow some binomial processes and have the following property called stationarity: it is possible to initiate...

The authors examine the advantages of incorporating strategic exposure to equity volatility into the investment opportunity set of a long-term equity investor. They consider two standard volatility investments: implied volatility and volatility risk premium strategies. An analytical framework,...

In contrast with the classical models of frictionless financial markets, market models with proportional transaction costs, even satisfying usual no-arbitrage properties, may admit arbitrage opportunities of the second kind. This means that there are self-financing portfolios with initial...

We consider a multivariate financial market with transaction costs as in Kabanov. We study the problem of finding the minimal initial capital needed to hedge, without risk, European-type contingent claims. We prove that the value of this stochastic control problem is given by the cost of the...

An agent's optimization problem of the expected terminal wealth utility in a trinomial tree economy is solved. At each transaction date, the agent can trade in a riskless asset, a primitive asset subject to constant proportional transaction costs, and a contingent claim characterized by some...

In this paper, we characterize explicitly the first derivative of the Value at Risk and the Expected Shortfall with respect to portfolio allocation when netting between positions exists. As a particular case, we examine a simple Gaussian example in order to illustrate the impact of netting...

We propose a general robust semiparametric bootstrap method to estimate conditional predictive distributions of GARCH-type models. Our approach is based on a robust estimator for the parameters in GARCH-type models and a robustified resampling method for standardized GARCH residuals, which...

n this paper we analyse recovery rates on defaulted bonds using the Standard and Poors / PMD database for the years 1981-1999. Due to the specific nature of the data (observations lie within 0 and 1), we must rely on nonstandard econometric techniques. The recovery rate density is estimated...