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A Multidimensional Exponential Utility Indifference Pricing Model with Applications to Counterparty Risk

Henderson, Vicky - 2015

This paper considers exponential utility indifference pricing for a multidimensional non-traded assets model subject to intertemporal default risk, and provides a semigroup approximation for the utility indifference price. The key tool is the splitting method, whose convergence is proved based...

Persistent link: https://www.econbiz.de/10013037486

Equilibrium Pricing in Incomplete Markets Under Translation Invariant Preferences

Cheridito, Patrick - 2013

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...

Persistent link: https://www.econbiz.de/10013093885

Sentiment lost : the effect of projecting the empirical pricing kernel onto a smaller filtration set

Sala, Carlo; Barone-Adesi, Giovanni - 2015

martingale, as required by the theory, but a strict local martingale with consequences on the validity of the risk … filtration set so that an absolutely continuous strict local martingale, once projected on it, becomes continuous with jumps …

Persistent link: https://www.econbiz.de/10011506352

Diffusion-Based Models for Financial Markets Without Martingale Measures

Fontana, Claudio - 2015

Local Martingale Measure, the financial market may still be viable, in the sense that strong forms of arbitrage are excluded … necessary and sufficient conditions for market viability in terms of the \emph{market price of risk} process and martingale … deflators. Regardless of the existence of a martingale measure, we show that the financial market may still be complete and …

Persistent link: https://www.econbiz.de/10013015958

Polynomial jump-diffusion models

Filipović, Damir; Larsson, Martin - 2017

We develop a comprehensive mathematical framework for polynomial jump-diffusions in a semimartingale context, which nest affine jump-diffusions and have broad applications in finance. We show that the polynomial property is preserved under polynomial transformations and Lévy time change. We...

Persistent link: https://www.econbiz.de/10011874871