We overcome the key limitations of the Black-Scholes model. In doing so, we provide an explicit, simple price formula for the European option that is identical to the classical Black-Scholes formula. Moreover, we do not need to know the distribution of the returns/price

We overcome an obstacle in mathematical optimization. In so doing, we explicitly derive the optimal values without assuming the smoothness of the value function. We apply our method to the portfolio model

In this paper, we provide general closed-form solutions to the incomplete-market random-coefficient dynamic optimization problem without the restrictive assumption of exponential or HARA utility function. Moreover, we explicitly express the optimal portfolio as a function of the optimal...

This article provides empirical comparative statics under simultaneous price and output uncertainty. In so doing, it presents a simple (one-step) and general statistical methodology under price and output uncertainty.

Purpose – The purpose of this paper is to present a realistic hedging model. Design/methodology/approach – The paper uses a general utility function, general distributions, and a multiple-input technology. Findings – The study finds that the impact of one or both risks on the optimal...