We consider an agent who takes a short position in a contingent claim and employs limit orders (LOs) and market orders (MOs) to trade in the underlying asset to maximize expected utility of terminal wealth. The agent solves a combined optimal stopping and control problem where trading has...

Today there are many equity derivatives that are traded on organized and over-the-counter markets. The models that allow market participants to value them and manage the associated risks on a daily basis are numerous. The idea of this study is, for vanilla equity options, to understand the Black...

We investigate American options in a multiple prior setting of continuous time and determine optimal exercise strategies form the perspective of an ambiguity averse buyer. The multiple prior setting relaxes the presumption of a known distribution of the stock price process and captures the idea...

In this paper, we derive optimal hedging strategies for options in electricity futures markets. Optimality is measured in terms of minimal variance and the associated minimal variance hedging portfolios are obtained by a stochastic maximum principle. Our explicit results are particularly useful...

This paper explores the application of contingent claims analysis (CCA) to two quot;hotquot; issues in life-cycle finance: (1) investing for retirement and (2) deciding when, if ever, to switch careers. Participants in individual retirement accounts do not have the time or the knowledge to make...

We investigate American options in a multiple prior setting of continuous time and determine optimal exercise strategies form the perspective of an ambiguity averse buyer. The multiple prior setting relaxes the presumption of a known distribution of the stock price process and captures the idea...

To analyze the economic significance of pricing errors of stock index options, a system of linear inequalities is developed which completely characterizes all risk arbitrage opportunities which arise if a well-behaved pricing kernel does not exist. The Stochastic Arbitrage system can account for...

We derive robust good-deal hedges and valuations under combined model ambiguity about the drift and volatility of asset prices for incomplete markets. Good-deal valuations are determined such that not just opportunities for arbitrage but also for overly attractive reward-to-risk ratios are...

We analyze the joint cross-section of monthly S&P500 stock index options and monthly CBOE Volatility Index options by constructing and evaluating option combinations that appear undervalued for all permissible values of the latent parameters of the unifying option pricing model and the joint...

The paper introduces a limit version of multiple stopping options such that the holder selects dynamically a weight function that control the distribution of the payments (benefits) over time. In applications for commodities and energy trading, a control process can represent the quantity that...