This paper proposes a new hedging scheme of European derivatives under uncertain volatility environments, in which a weighted variance swap called the polynomial variance swap is added to the Black-Scholes delta hedging for managing exposure to volatility risk. In general, under these...

This paper proposes a new hedging scheme of European derivatives under uncertain volatility environments, in which a weighted variance swap called the polynomial variance swap is added to the Black-Scholes delta hedging for managing exposure to volatility risk. In general, under these...

This is an online appendix of "Sup-inf/inf-sup problem on choice of a probability measure by FBSDE approach". Particularly, we provide proofs of Propositions 1-3 and an example of FBSDEs, in which sgn(Z1); sgn(Z2) are determined by solving the FBSDEs explicitly, for Section III-B in the original...

In this study, we investigate ordering patterns of different types of market participants in Tokyo Stock Exchange (TSE) by examining order records of the listed stocks. Firstly, we categorize the virtual servers in the trading system of TSE, each of which is linked to a single trading...

This paper develops a new scheme for improving an approximation method of a probability density function, which is inspired by the idea in best approximation in an inner product space. Moreover, we applies “Dykstra's cyclic projections algorithm” for its implementation. Numerical examples...

This paper presents a new asset pricing model incorporating fundamental uncertainties by choice of a probability measure. This approach is novel in that we incorporate uncertainties on Brownian motions describing risks into the existing asset pricing model. Particularly, we show extensions of...

This paper investigates derivatives pricing under existence of liquidity costs and market impacts for the underlying asset in continuous time. Firstly, we formulate the charge for the liquidity cost and the market impact on the derivatives prices through a stochastic control problem that aims to...

This paper presents an application of a linear quadratic stochastic differential game to a financial model that describes trading behaviors of different types of players in a high frequency stock market. Stability of the stock market in a high frequency environment is a central issue in...