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aforementioned phenomenon where risk averse and competitive option market makers quote bid and ask prices to minimize their inventory … risk in an incomplete market with both directional and volatility risk. We extend this model to multi-periods and show that …
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The present paper considers a class of general equilibrium economics when the primitive uncertainty model features uncertainty about continuous-time volatility. This requires a set of mutually singular priors, which do not share the same null sets. For this setting we introduce an appropriate...
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