We reconsider the microeconomic foundations of financial economics. Motivated by the importance of Knightian uncertainty in markets, we present a model that does not carry any probabilistic structure ex ante, yet is based on a common order. We derive the fundamental equivalence of economic...

Although leveraged ETFs are popular products for retail investors, how to hedge them poses a great challenge to financial institutions. We develop an optimal rebalancing (hedging) model for leveraged ETFs in a comprehensive setting, including overnight market closure and market frictions. The...

We consider a financial market with liquidity cost as in Çetin, Jarrow and Protter, where the supply function depends on a parameter ε, with ε=0 corresponding to the perfect liquid situation. Using the PDE characterization of Çetin, Soner and Touzi of the super-hedging cost of an option...

We study the set of marginal utility-based prices of a financial derivative in the case where the investor has a non-replicable random endowment. We provide an example showing that even in the simplest of settings - such as Samuelson's geometric Brownian motion model - the interval of marginal...