Related papers: On the Structure of General Mean-Variance Hedging …

We consider the problem of optimizing a portfolio of financial assets, where the number of assets can be much larger than the number of observations. The optimal portfolio weights require estimating the inverse covariance matrix of excess…

It is shown that delta hedging provides the optimal trading strategy in terms of minimal required initial capital to replicate a given terminal payoff in a continuous-time Markovian context. This holds true in market models where no…

Estimation of the mean vector and covariance matrix is of central importance in the analysis of multivariate data. In the framework of generalized linear models, usually the variances are certain functions of the means with the normal…

In Electricity markets, illiquidity, transaction costs and market price characteristics prevent managers to replicate exactly contracts. A residual risk is always present and the hedging strategy depends on a risk criterion chosen. We…

We develop a general theory of risk measures that determines the optimal amount of capital to raise and invest in a portfolio of reference traded securities in order to meet a pre-specified regulatory requirement. The distinguishing feature…

Portfolio optimization has long been dominated by covariance-based strategies, such as the Markowitz Mean-Variance framework. However, these approaches often fail to ensure a balanced risk structure across assets, leading to concentration…

We consider the problem of portfolio selection within the classical Markowitz mean-variance framework, reformulated as a constrained least-squares regression problem. We propose to add to the objective function a penalty proportional to the…

We consider a financial market model with a single risky asset whose price process evolves according to a general jump-diffusion with locally bounded coefficients and where market participants have only access to a partial information flow.…

Systemic risk measures are crucial for the stability of financial markets, yet classical formulations fail to capture the complexity of market volatility. We propose a new framework for systemic risk measurement on the variable-exponent…

Dynamic optimization of mean and variance in Markov decision processes (MDPs) is a long-standing challenge caused by the failure of dynamic programming. In this paper, we propose a new approach to find the globally optimal policy for…

A principled method to obtain approximate solutions of general constrained integer optimization problems is introduced. The approach is based on the calculation of a mean field probability distribution for the decision variables which is…

In this work, we introduce a Monte Carlo method for the dynamic hedging of general European-type contingent claims in a multidimensional Brownian arbitrage-free market. Based on bounded variation martingale approximations for…

In this paper monetary risk measures that are positively superhomogeneous, called star-shaped risk measures, are characterized and their properties studied. The measures in this class, which arise when the controversial subadditivity…

This paper is concerned with asymptotic behavior of a variety of functionals of increments of continuous semimartingales. Sampling times are assumed to follow a rather general discretization scheme. If an underlying semimartingale is…

In this paper, we prove the global risk optimality of the hedging strategy of contingent claim, which is explicitly (or called semi-explicitly) constructed for an incomplete financial market with external risk factors of non-Gaussian…

We present a machine learning approach for finding minimal equivalent martingale measures for markets simulators of tradable instruments, e.g. for a spot price and options written on the same underlying. We extend our results to markets…

Dzhaparidze and Spreij [5] showed that the quadratic variation of a semimartingale can be approximated using a randomized periodogram. We show that the same approximation is valid for a special class of continuous stochastic processes. This…

Proof that under simple assumptions, such as constraints of Put-Call Parity, the probability measure for the valuation of a European option has the mean derived from the forward price which can, but does not have to be the risk-neutral one,…

We study an optimal investment/consumption problem in a model capturing market and credit risk dependencies. Stochastic factors drive both the default intensity and the volatility of the stocks in the portfolio. We use the martingale…

This paper extends the long-term factorization of the stochastic discount factor introduced and studied by Alvarez and Jermann (2005) in discretetime ergodic environments and by Hansen and Scheinkman (2009) and Hansen (2012) in Markovian…