start from two simple, economically motivated axioms, namely absence of arbitrage (in the sense of NUPBR) and absence of … relative arbitrage among all buy-and-hold strategies (called static efficiency). A valuation process for a payoff is then … valuing by absence of arbitrage alone. We show that this always yields put-call parity, although put and call values …

Energy companies with commitments to meet customers' daily electricity demands face the problem of hedging load and … hedging decisions, while also intuitively capturing the key features of the electricity market. Driven by three stochastic … factors including the load process, our power price model allows for the calculation of closed-form pricing formulas for …

stochastic mechanism. We explore the implications for pricing stock, index and foreign currency options of the assumption that … accounting for heterogeneous information arrival may minimize the ubiquitous pricing bias 'smile-effect' of standard option … pricing models. We propose a conceptually simple but numerically intensive maximum likelihood estimator of the parameters of a …

This article shows that portfolio constraints can give rise to rational asset pricing bubbles in equilibrium even if … there are unconstrained agents in the economy who can benefit from the induced limited arbitrage opportunities. Furthermore …

dimensions of the pricing formulation. This paper is the first that extends the technique for a generalized jump …