Arbitrage-Free Pricing in Nonlinear Market Models
Host
Department of Applied Mathematics
Speaker
Igor Cialenco
Department of Applied Mathematics, Illinois Institute of Technology
http://www.math.iit.edu/~igor/
Description
We proposed a nonlinear arbitrage-free pricing theory, which arises in a natural way when accounting for salient features of real-world trades such as: trading constraints, differential funding costs, collateralization, counterparty credit risk and capital requirements. We introduce the notion of regular market models, and within this class of models, we propose several notions of no-arbitrage, and several definitions of fair prices. Finally, we will discuss the BSDEs approach to the proposed valuation and hedging methodology, and we will consider several illustrative examples.
This is joint work with Tomasz R. Bielecki (Illinois Tech) and Marek Rutkowski (University of Sydney).
Event Topic
Mathematical Finance, Stochastic Analysis, and Machine Learning