• Corpus ID: 237304357

Valuation of contingent claims with short selling bans under an equal-risk pricing framework

  title={Valuation of contingent claims with short selling bans under an equal-risk pricing framework},
  author={Guiyuan Ma and Song‐Ping Zhu and Ivan Guo},
This paper studies the valuation of European contingent claims with short selling bans under the equal risk pricing (ERP) framework proposed in Guo and Zhu (2017) where analytical pricing formulae were derived in the case of monotonic payoffs under risk-neutral measures. We establish a unified framework for this new pricing approach so that its range of application can be significantly expanded. The results of Guo and Zhu (2017) are extended to the case of non-monotonic payoffs (such as a… 



A revised option pricing formula with the underlying being banned from short selling

An important issue in derivative pricing that hasn't been explored much until very recently is the impact of short selling to the price of an option. This paper extends a recent publication in this

The Valuation of Contingent Claims Under Portfolio Constraints: Reservation Buying and Selling Prices

With constrained portfolios contingent claims do not generally have a unique price that rules out arbitrage opportunities. Earlier studies have demonstrated that when there are constraints on the

Dynamic Programming and Pricing of Contingent Claims in an Incomplete Market

The problem of pricing contingent claims or options from the price dynamics of certain securities is well understood in the context of a complete financial market. This paper studies the same problem

Deep Equal Risk Pricing of Financial Derivatives with Multiple Hedging Instruments

This paper studies the equal risk pricing (ERP) framework for the valuation of European financial derivatives. This option pricing approach is consistent with global trading strategies by setting the


We study the uniqueness of the marginal utility‐based price of contingent claims in a semimartingale model of an incomplete financial market. In particular, we obtain that a necessary and sufficient

Nontraded Asset Valuation with Portfolio Constraints : A Binomial Approach

We provide a simple binomial framework to value American-style derivatives subject to trading restrictions. The optimal investment of liquid wealth is solved simultaneously with the early exercise

On the pricing of contingent claims under constraints

We discuss the problem of pricing contingent claims, such as European call-options, based on the fundamental principle of “absence of arbitrage” and in the presence of constraints on portfolio

Equal risk pricing of derivatives with deep hedging

This article provides a universal and tractable methodology based on deep reinforcement learning to implement the equal risk pricing framework for financial derivatives pricing under very general

Dynamic Asset Pricing with Interactions between Short-Sale and Borrowing Constraints

This paper studies the joint effect of borrowing and short-sale constraints under heterogeneous beliefs and risk aversions. Although the constraints never simultaneously bind in equilibrium,

Pricing European Call Options Under a Hard-to-Borrow Stock

A partial differential equation approach for pricing European call options, regardless of the independence assumption is proposed, and it is found that the semi-explicit formula is a good approximate solution when the coupling parameter is small, but when the stock price and the buy-in rate are significantly coupled, the PDE approach is preferred.