Related papers: On honest times in financial modeling
A central problem of Quantitative Finance is that of formulating a probabilistic model of the time evolution of asset prices allowing reliable predictions on their future volatility. As in several natural phenomena, the predictions of such…
In this paper, we consider the portfolio optimization problem in a financial market under a general utility function. Empirical results suggest that if a significant market fluctuation occurs, invested wealth tends to have a notable change…
We consider portfolio optimization under a preference model in a single-period, complete market. This preference model includes Yaari's dual theory of choice and quantile maximization as special cases. We characterize when the optimal…
We investigate the growth optimal strategy over a finite time horizon for a stock and bond portfolio in an analytically solvable multiplicative Markovian market model. We show that the optimal strategy consists in holding the amount of…
We present a non-probabilistic, path-by-path framework for studying path-dependent (i.e., where weight is a functional of time and historical time-series), long-only portfolio allocation in continuous-time based on [Chiu & Cont '23], where…
We revisit mean-risk portfolio selection in a one-period financial market where risk is quantified by a positively homogeneous risk measure $\rho$. We first show that under mild assumptions, the set of optimal portfolios for a fixed return…
Executing even moderately large derivatives orders can be expensive and risky; it's hard to balance the uncertainty of working an order over time versus paying a liquidity premium for immediate execution. Here, we introduce the Time Is…
We study hedging and pricing of unattainable contingent claims in a non-Markovian regime-switching financial model. Our financial market consists of a bank account and a risky asset whose dynamics are driven by a Brownian motion and a…
We study the optimal investment problem for a continuous time incomplete market model such that the risk-free rate, the appreciation rates and the volatility of the stocks are all random; they are assumed to be independent from the driving…
We consider the pricing of derivatives in a setting with trading restrictions, but without any probabilistic assumptions on the underlying model, in discrete and continuous time. In particular, we assume that European put or call options…
This paper presents an axiomatic scheme for interest rate models in discrete time. We take a pricing kernel approach, which builds in the arbitrage-free property and provides a link to equilibrium economics. We require that the pricing…
In multi-state life insurance, an adequate balance between analytic tractability, computational efficiency, and statistical flexibility is of great importance. This might explain the popularity of Markov chain modelling, where matrix…
We shortly review the statistical properties of the escape times, or hitting times, for stock price returns by using different models which describe the stock market evolution. We compare the probability function (PF) of these escape times…
This paper considers the portfolio management problem of optimal investment, consumption and life insurance. We are concerned with time inconsistency of optimal strategies. Natural assumptions, like different discount rates for consumption…
We study a robust utility maximization problem in a general discrete-time frictionless market under quasi-sure no-arbitrage. The investor is assumed to have a random and concave utility function defined on the whole real-line. She also…
Experimentation involves risk. The investigator expends time and money in the pursuit of data that supports a hypothesis. In the end, the investigator may find that all of these costs were for naught and the data fail to reject the null.…
A new standpoint on financial time series, without the use of any mathematical model and of probabilistic tools, yields not only a rigorous approach of trends and volatility, but also efficient calculations which were already successfully…
The Cover universal portfolio (UP from now on) has many interesting theoretical and numerical properties and was investigated for a long time. Building on it, we explore what happens when we add this UP to the market as a new synthetic…
Portfolio optimization in real-world financial markets is notoriously difficult due to non-stationarity, noisy data, and high transaction costs. Standard predict-then-optimize methods first forecast returns and then solve for weights,…
Financial correlations play a central role in financial theory and also in many practical applications. From theoretical point of view, the key interest is in a proper description of the structure and dynamics of correlations. From…