In a tractable stochastic volatility model, we identify the price of the smile as the price of the unspanned risks traded in SPX option markets. The price of the smile reflects two persistent volatility and skewness risks, which imply a downward sloping term structure of low-frequency variance...

In the Seel–Strack contest (J Econ Theory 148(5):2033–2048, <CitationRef CitationID="CR11">2013</CitationRef>), <InlineEquation ID="IEq1"> <EquationSource Format="TEX">$$n$$</EquationSource> <EquationSource Format="MATHML"> <math xmlns:xlink="http://www.w3.org/1999/xlink"> <mi>n</mi> </math> </EquationSource> </InlineEquation> agents each privately observe an independent copy of a drifting Brownian motion which starts above zero and is absorbed at zero. Each agent chooses when to stop the process she observes, and the winner of the...</equationsource></equationsource></inlineequation></citationref>

In this paper we give conditions for the existence of discounted robust optimal policies under an infinite planning horizon for a general class of controlled diffusion processes. As for the attribute “robust” we mean the coexistence of unknown and non-observable parameters affecting the...