This paper formulates a model of utility for a continuous time frame-work that captures the decision-maker's concern with ambiguity about both volatility and drift. Corresponding extensions of some basic results in asset pricing theory are presented. First, we derive arbitrage-free pricing rules...

The academic interest in utility indifference based approaches to derivative pricing in incomplete markets has grown during the last decades. In lack of arbitrage arguments the fair price of an option can be found through the value function of two optional investment choices, one where an option...

In this paper, we study a stochastic optimal control for max-min utility admitting volatility ambiguity. By standard assumptions, we establish the dynamic programming principle and the related Hamilton-Jacobi-Bellman (HJB) equation. Finally, we show that the value function is a viscosity...

This paper presents an introductory analysis of price formation and volatility in the European Union Emissions Trading Scheme using highfrequency data. The results show that there are several anomalies both in the EUA spot and EUA futures market. First, price formation seems to take place on...

In this paper we model the adjustment process of European Union Allowance (EUA) prices to the releases of announcements at high-frequency controlling for intraday periodicity, volatility clustering and volatility persistence. We find that the high-frequency EUA price dynamics are very well...