We consider the mean-variance hedging problem when asset prices follow ItÆ processes in an incomplete market framework. The hedging numÊraire and the variance-optimal martingale measure appear to be a key tool for characterizing the optimal hedging strategy (see GouriÊroux et al. 1996;...

This paper analyzes the interactions between competitive (wholesale) spot, retail, and forward markets and vertical integration in electricity markets. We develop an equilibrium model with producers, retailers, and traders to study and quantify the impact of forward markets and vertical...

We extend the fundamental theorem of asset pricing to the case of markets with liquidity risk. Our results generalize, when the probability space is finite, those obtained by Kabanov et al. [Kabanov, Y., Stricker, C., 2001. The Harrison-Pliska arbitrage pricing theorem under transaction costs....