Displaying similar documents to “Information, inflation, and interest”

Hedging of the European option in discrete time under transaction costs depending on time

Marek Andrzej Kociński (2010)

Applicationes Mathematicae

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Hedging of the European option in a discrete time financial market with proportional transaction costs is considered. It is shown that for a certain class of options the set of portfolios which allow the seller to pay the claim of the buyer in quite a general discrete time market model is the same as the set of such portfolios under the assumption that the stock price movement is given by a suitable CRR model.

Dynamic model of market with uninformed market maker

Martin Šmíd, Miloš Kopa (2017)

Kybernetika

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We model a market with multiple liquidity takers and a single market maker maximizing his discounted consumption while keeping a prescribed probability of bankruptcy. We show that, given this setting, spread and price bias (a difference between the midpoint- and the expected fair price) depend solely on the MM's inventory and his uncertainty concerning the fair price. Tested on ten-second data from ten US electronic markets, our model gives significant results with the price bias decreasing...

Pricing forward-start options in the HJM framework; evidence from the Polish market

P. Sztuba, A. Weron (2001)

Applicationes Mathematicae

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We show how to use the Gaussian HJM model to price modified forward-start options. Using data from the Polish market we calibrate the model and price this exotic option on the term structure. The specific problems of Central Eastern European emerging markets do not permit the use of the popular lognormal models of forward LIBOR or swap rates. We show how to overcome this difficulty.

Option pricing in a CEV model with liquidity costs

Krzysztof Turek (2016)

Applicationes Mathematicae

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The goal of this paper is to make an attempt to generalise the model of pricing European options with an illiquid underlying asset considered by Rogers and Singh (2010). We assume that an investor's decisions have only a temporary effect on the price, which is proportional to the square of the change of the number of asset units in the investor's portfolio. We also assume that the underlying asset price follows a CEV model. To prove existence and uniqueness of the solution, we use techniques...