This article constructs an entropy pricing framework by incorporating a set of informative risk-neutral moments (RNMs) extracted from the market-available options as constraints. Within the RNM-constrained entropic framework, a unique distribution cl...
In order to rationally deal with the belief degree, Liu proposed uncertainty theory and refined into a branch of mathematics based on normality, self-duality, sub-additivity and product axioms. Subsequently, Liu defined the uncertainty process to des...
The risk-neutral density is a fundamental concept in pricing financial derivatives, risk management, and assessing financial markets’ perceptions over significant political or economic events. In this paper, we propose a new nonparametric metho...
This paper investigates the approximated arbitrage bounds of option prices in an incomplete market setting and draws implications for option pricing and risk management. It gives consideration to periods of global financial crisis and European sovere...
In this study, we investigate the ability of three higher-order risk-neutral return cumulants to predict short maturity (weekly) returns of oil futures. Our data includes weekly West Texas Crude Oil futures options that expire in 7 days (7DTE). Using...
It is common in financial markets for market makers to offer prices on derivative instruments even though they are uncertain about the underlying asset’s value. This paper studies the mathematical problem that arises as a result. Derivatives ar...
Recent studies have suggested that it is feasible to recover a physical measure from a risk-neutral measure. Given a market state variable modeled as a Markov process, the key concept is to extract a unique positive eigenfunction of the generator of...
In this paper, we carry out a comprehensive comparison of Gaussian generalized autoregressive conditional heteroskedasticity (GARCH) and autoregressive stochastic volatility (ARSV) models for volatility forecasting using the S&P 500 Index. In par...
This paper introduces a new computational tool for the analysis of the risks embedded in a set of prices of European-style options. The software enables the estimation of the risk-neutral density (RND) from the observed option prices by means of orth...
In this paper, we study the skewness risk and its return predictability in the energy market. Skewness risk is often used to measure the possibility of market crash. We study both physical skewness (market skewness and cross-sectional average realize...
The peer-to-peer (P2P) strategy as a new trading scheme has recently gained attention in local electricity markets. This is a practical framework to enhance the flexibility and reliability of energy hubs, specifically for industrial prosumers dealing...
The joint uncertainties of wholesale price and end-user demand quantity often poses huge pricing challenges to energy retailers. However, the literature lacks analysis of such uncertainties’ impacts on retailer pricing behaviors and possible he...
Traditional insurance’s earthquake contingency costs are insufficient for earthquake funding due to extreme differences from actual losses. The earthquake bond (EB) links insurance to capital market bonds, enabling higher and more sustainable e...
Insurance companies issue guarantees that need to be valued according to the market expectations. By calibrating option pricing models to the available implied volatility surfaces, one deals with the so-called risk-neutral measure
Current flood risk management projects have been criticized for their high carbon emissions, raising the need for carbon emission reduction and carbon absorption efforts to mitigate environmental impacts and achieve carbon neutrality goals. The resea...
We present the Generalized Gamma (GG) distribution as a possible risk neutral distribution (RND) for modeling European options prices under Heston’s stochastic volatility (SV) model. We demonstrate that under a particular reparametrization, thi...
By reinterpreting the calibration of structural models, a reassessment of the importance of the input variables is undertaken. The analysis shows that volatility is the key parameter to any calibration exercise, by several orders of magnitude. To max...
According to the research, the proportions of various types of investors may or may not change in response to different trading strategies or complex trading environments. This paper investigates a single-period trading model for multiple risk-averse...
Carbon-neutral ship technologies not only protect the environment but also ensure the maritime sector’s future competitiveness and compliance with international regulations. Therefore, while the transition to carbon-neutral solutions in both po...
Risk neutral measures are defined such that the basic random assets in a portfolio are martingales. Hence, when the market model is complete, valuation of other financial instruments is a relatively straightforward task when those basic random assets...
This paper develops a two-period analytical model of trade-in insurance and rebate design in a product upgrade and recovery system with successive product generations. In standard trade-in programs, customers face uncertainty about future rebate elig...
Climate change is widely acknowledged as the paramount global challenge of the 21st century, bringing economic, social, and environmental impacts due to rising global temperatures, more frequent extreme weather events, and ecosystem disturbances. To...
The celebrated Heston’s stochastic volatility (SV) model for the valuation of European options provides closed form solutions that are given in terms of characteristic functions. However, the numerical calibration of this five-parameter model,...
We introduce a new coherent risk measure, the minimal-entropy risk measure, which is built on the minimal-entropy
Due to the low demand for conventional annuities, alternative retirement products are sought. Quite recently, tontines have been frequently brought up as a promising option in this respect. Inspired by unit-linked life insurance and retirement produc...
A pot study was conducted to assess the potential of green waste compost on soil properties, growth, physiology, and metal uptake of lettuce plants grown in acidic and neutral loam-textured soils irrigated with copper- and zinc-polluted wastewater (W...
Forward-looking metrics of uncertainty based on options-implied information should be highly predictive of equity market returns in accordance with asset pricing theory. Empirically, however, the ability of the VIX, for example, to predict returns is...
When pricing OTC contracts in the presence of additional risk factors and costs, such as credit risk and funding and collateral costs, the starting “clean price” is modified additively by valuation adjustments (XVAs) that account for each...
This paper introduces an HJM-style forward modeling framework for valuing American options. Instead of modeling the dynamics of the underlying asset, we model the maturity-indexed forward drift of the gain process, leading to two no-arbitrage represe...
This paper develops a unified framework for mathematical finance under general semimartingale models that allow for dividend payments, negative asset prices, and unbounded jumps. We present a rigorous approach to the mathematical modeling of financia...
Freight derivative prices have been modeled assuming that the spot freight follows a particular stochastic process in order to manage them, like freight futures, forwards and options. However, an explicit formula for pricing freight options is not kn...
The spot freight rate processes considered in the literature for pricing forward freight agreements (FFA) and freight options usually have a particular dynamics in order to obtain the prices. In those cases, the FFA prices are explicitly obtained. Ho...
The aim of this investigation was to determine the effect of SARS-Cov-2 vaccination in hemodialysis patients, search for risk factors for non- or low-response, and to measure the effect of a third booster vaccination in non- or low-responders. Method...
Metro stray currents flowing into transformer-neutral points cause the high neutral DC and a transformer to operate in the DC bias state.Because neutral DC caused by stray current varies with time, the neutral DC value cannot be used as the only char...
A new method for pricing contingent claims based on an asymptotic expansion of the dynamics of the pricing density is introduced. The expansion is conducted in a preferred coordinate frame, in which the pricing density looks stationary. The resulting...
Under the background of climate change, the risk spillover within the energy system is constantly intensifying. Clarifying the coupling relationship between entities within the energy system can help policymakers propose more reasonable policy measur...
Lithium-based new energy is identified as a strategic emerging industry in many countries like China. The development of lithium-based new energy industries will play a crucial role in global clean energy transitions towards carbon neutrality. This p...
In this article, we first provide a survey of the exponential option pricing models and show that in the framework of the risk-neutral approach, they are governed by the space-fractional diffusion equation. Then, we introduce a more general class of...
We develop a binary tree pricing model with underlying asset price dynamics following Itô–McKean skew Brownian motion. Our work was motivated by the Corns–Satchell, continuous-time, option pricing model. However, the Corns–Sat...
The application of stochastic volatility (SV) models in the option pricing literature usually assumes that the market has sufficient option data to calibrate the model’s risk-neutral parameters. When option data are insufficient or unavailable, marke...
Soil is a key component of ecosystems as it provides fundamental ecosystem functions and services, first of all supporting primary productivity, by physical, chemical and biological interaction with plants. However, soil loss and degradation are at p...
This study investigates emotional patterns in state government disaster guideline documents using keyword-level emotion analysis and TF–IDF based topic modeling, framing disaster policy communication as an emotional–cognitive dual structu...
In this study, we first present a time-fractional L
Capacity expansion models for electricity grids typically use deterministic optimization, addressing uncertainty through ex-post analysis by varying input parameters. This paper presents a stochastic capacity expansion model that integrates uncertain...
As economic fluctuations and market uncertainty intensify, supply chain members face enormous challenges. To explore the role of revenue-sharing contracts in supply chain members with different risk preferences, we study the risk-averse two-stage sup...
Pre-disaster protection strategies are essential for enhancing the resilience of electric power systems against natural disasters. Considering the budgets for protection strategies, the dependency of other infrastructure systems on electricity, and t...
All long-term hydropower planning problems require a forecast of the inflow during the planning period. However, it is challenging to accurately forecast inflows for a year or more. Therefore, it is common to use stochastic models considering the unc...
This paper addresses a critical inconsistency in models of the term structure of interest rates (TSIR), where zero-coupon bonds are priced under risk-neutral measures distinct from those used in equity markets. We consider a unified TSIR framework th...
In this paper, we modify Duan’s (1995) local risk-neutral valuation relationship (mLRNVR) for the GARCH option-pricing models. In our mLRNVR, the conditional variances under two measures are designed to be different and the variance process is more p...
In this paper, we suggest a Bayesian multivariate approach for pricing a reverse mortgage, allowing for house price risk, interest rate risk and longevity risk. We adopt the principle of maximum entropy in risk-neutralisation of these three risk comp...
of 36