Arbitrage-Free Pricing Of Derivatives In Nonlinear Market Models

2017/01/29 by Tomasz R. Bielecki, Bielecki, Tomasz R., Igor Cialenco +3 · 1 citation
Economics, Econometrics and Finance · #60J28 #91G40 #Banking stability, regulation, efficiency #Credit Risk and Financial Regulations #FOS: Economics and business #Mathematical Finance (q-fin.MF) #Pricing of Securities (q-fin.PR) #Stochastic processes and financial applications

paper · pdf · doi:10.48550/arxiv.1701.08399

openalex publication_date 2017/01/29 · openalex created_date 2025/10/10 · openalex updated_date 2026/07/28

Abstract

The objective of this paper is to provide a comprehensive study no-arbitrage pricing of financial derivatives in the presence of funding costs, the counterparty credit risk and market frictions affecting the trading mechanism, such as collateralization and capital requirements. To achieve our goals, we extend in several respects the nonlinear pricing approach developed in El Karoui and Quenez (1997) and El Karoui et al. (1997), which was subsequently continued in Bielecki and Rutkowski (2015).

Citations

• BSDEs driven by a multi-dimensional martingale and their applications to market models with funding costs

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