How does private information get incorporated into option prices? To study this question, I develop a non-linear, noisy rational expectations equilibrium model with asymmetric information and a full menu of call and put options available for trading. The model allows for an arbitrary...

In turbulent and volatile markets options can be a preferred asset class for protection against adverse market movements. When volatility increases and markets become sparsely traded, it is not always effective to hedge adverse market movements using any option. Options, where the underlying is...

In this paper we primarily obtain the explicit formulas for the distribution function of the variance gamma process. The formulas are based on values of hypergeometric functions. This result is applied to European option pricing. Basing on the established formulas, we get the prices of binary...

In this paper we propose a novel flexible framework based on time changed Lévy process for the joint evolution of stock log-returns and their volatility with the aim of analysing which risk factors and which distribution features provide a robust calibration, repricing and hedging performance....

A new acceptable price approach to stochastic endpoint determination at given horizon accounting for the marginal investor beliefs and behaviour was proposed. Two-sided filtration with FBSDE defined stochastic dynamics was formulated for acceptable asset price under the risk-neutral probability...

The classical version of the Fundamental Theorem of Asset Pricing requires that zero-sets of the real-world probability measure P are known. We chose a different route and start from a possibly non-dominated set of probability measures P representing uncertainty about the zero-sets of the real...

We develop a theoretical trading conditioning model subject to price volatility and return information in terms of market psychological behavior, based on analytical transaction volume-price probability wave distributions in which we use transaction volume probability to describe price...

This paper briefly identifies and corrects an error in Duffie and Singleton (1999). The error to omit a variable casts doubt on the arguments of Duffie and Singleton to constitute Heath-Jarrow-Morton (1992) type term structures on defaultable bonds. The error reveals inconsistency through their...

We propose a general discrete-time framework for deriving equilibrium prices of financial securities. It allows for heterogeneous agents, unspanned random endowments and convex trading constraints. We give a dual characterization of equilibria and provide general results on their existence and...

This paper studies the relation between the uncertainty of volatility, measured as the volatility of volatility, and future delta-hedged equity option returns. We find that delta-hedged option returns consistently decrease in uncertainty of volatility. Our results hold for different measures of...