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An approximation formula for the price of credit default swaps under the fast-mean reversion volatility model

Xin-Jiang He, Wenting Chen (2019)

Applications of Mathematics

We consider the pricing of credit default swaps (CDSs) with the reference asset assumed to follow a geometric Brownian motion with a fast mean-reverting stochastic volatility, which is often observed in the financial market. To establish the pricing mechanics of the CDS, we set up a default model, under which the fair price of the CDS containing the unknown “no default” probability is derived first. It is shown that the “no default” probability is equivalent to the price of a down-and-out binary...

An asset – liability management stochastic program of a leasing company

Tomáš Rusý, Miloš Kopa (2018)

Kybernetika

We build a multi-stage stochastic program of an asset-liability management problem of a leasing company, analyse model results and present a stress-testing methodology suited for financial applications. At the beginning, the business model of such a company is formulated. We introduce three various risk constraints, namely the chance constraint, the Value-at-Risk constraint and the conditional Value-at-Risk constraint along with the second-order stochastic dominance constraint, which are applied...

An axiomatization of the aspiration core

Hans Keiding (2006)

Banach Center Publications

The aspiration core of a TU game was introduced by Bennett [1] as a payoff vector which is undominated and achievable in the sense that each player belongs to a coalition which can obtain the specified payoff for its members, and which minimizes the distance to the set of aggregate feasible payoffs among all such payoff vectors. In the paper a set of axioms is proposed which characterize the aspiration core, which may be considered as an extension of the core to a much larger set of games. The axioms...

An equilibrium model for electricity auctions

Juri Hinz (2003)

Applicationes Mathematicae

This work discusses the process of price formation for electrical energy within an auction-like trading environment. Calculating optimal bid strategies of power producers by equilibrium arguments, we obtain the corresponding electricity price and estimate its tail behavior.

An existence result on partitioning of a measurable space: Pareto optimality and core

Nobusumi Sagara (2006)

Kybernetika

This paper investigates the problem of optimal partitioning of a measurable space among a finite number of individuals. We demonstrate the sufficient conditions for the existence of weakly Pareto optimal partitions and for the equivalence between weak Pareto optimality and Pareto optimality. We demonstrate that every weakly Pareto optimal partition is a solution to the problem of maximizing a weighted sum of individual utilities. We also provide sufficient conditions for the existence of core partitions...

An explicit solution for optimal investment problems with autoregressive prices and exponential utility

Sándor Deák, Miklós Rásonyi (2015)

Applicationes Mathematicae

We calculate explicitly the optimal strategy for an investor with exponential utility function when the price of a single risky asset (stock) follows a discrete-time autoregressive Gaussian process. We also calculate its performance and analyse it when the trading horizon tends to infinity. Dependence of the asymptotic performance on the autoregression parameter is determined. This provides, to the best of our knowledge, the first instance of a theorem linking directly the memory of the asset price...

An idempotent algorithm for a class of network-disruption games

William M. McEneaney, Amit Pandey (2016)

Kybernetika

A game is considered where the communication network of the first player is explicitly modelled. The second player may induce delays in this network, while the first player may counteract such actions. Costs are modelled through expectations over idempotent probability measures. The idempotent probabilities are conditioned by observational data, the arrival of which may have been delayed along the communication network. This induces a game where the state space consists of the network delays. Even...

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