Related papers: Optimal partial hedging in a discrete-time market …
In an incomplete market driven by time-changed L\'evy noises we consider the problem of hedging a financial position coupled with the underlying risk of model uncertainty. Then we study hedging under worst-case-scenario. The proposed…
We study robust stochastic optimization problems in the quasi-sure setting in discrete-time. The strategies in the multi-period-case are restricted to those taking values in a discrete set. The optimization problems under consideration are…
The min-knapsack problem with compactness constraints extends the classical knapsack problem, in the case of ordered items, by introducing a restriction ensuring that they cannot be too far apart. This problem has applications in…
The issue of constructing a risk minimizing hedge under an additional almost-surely type constraint on the shortfall profile is examined. Several classical risk minimizing problems are adapted to the new setting and solved. In particular,…
We consider a financial model with permanent price impact. Continuous time trading dynamics are derived as the limit of discrete rebalancing policies. We then study the problem of super-hedging a European option. Our main result is the…
We consider the hedging error of a derivative due to discrete trading in the presence of a drift in the dynamics of the underlying asset. We suppose that the trader wishes to find rebalancing times for the hedging portfolio which enable him…
We consider the problem of optimal hedging in an incomplete market with an established pricing kernel. In such a market, prices are uniquely determined, but perfect hedges are usually not available. We work in the rather general setting of…
With model uncertainty characterized by a convex, possibly non-dominated set of probability measures, the agent minimizes the cost of hedging a path dependent contingent claim with given expected success ratio, in a discrete-time,…
Chance constraints are frequently used to limit the probability of constraint violations in real-world optimization problems where the constraints involve stochastic components. We study chance-constrained submodular optimization problems,…
We consider the problem of hedging a European contingent claim in a Bachelier model with transient price impact as proposed by Almgren and Chriss. Following the approach of Rogers and Singh and Naujokat and Westray, the hedging problem can…
We investigate constrained optimal control problems for linear stochastic dynamical systems evolving in discrete time. We consider minimization of an expected value cost over a finite horizon. Hard constraints are introduced first, and then…
In this article, we introduce an algorithm called Backward Hedging, designed for hedging European and American options while considering transaction costs. The optimal strategy is determined by minimizing an appropriate loss function, which…
The problem of determining the European-style option price in the incomplete market has been examined within the framework of stochastic optimization. An analytic method based on the discrete dynamic programming equation (Bellman equation)…
In this paper, we consider the classic stochastic (dynamic) knapsack problem, a fundamental mathematical model in revenue management, with general time-varying random demand. Our main goal is to study the optimal policies, which can be…
This paper analyzes a problem of optimal static hedging using derivatives in incomplete markets. The investor is assumed to have a risk exposure to two underlying assets. The hedging instruments are vanilla options written on a single…
The probability minimizing problem of large losses of portfolio in discrete and continuous time models is studied. This gives a generalization of quantile hedging presented in [3].
Stochastic knapsack problem originally was a versatile model for controls in telecommunication networks. Recently, it draws attentions of revenue management community by serving as a basic model for allocating resources over time. We…
The duality between the robust (or equivalently, model independent) hedging of path dependent European options and a martingale optimal transport problem is proved. The financial market is modeled through a risky asset whose price is only…
In this work, we study the optimal discretization error of stochastic integrals, in the context of the hedging error in a multidimensional It\^{o} model when the discrete rebalancing dates are stopping times. We investigate the convergence,…
The online knapsack problem is a classic problem in the field of online algorithms. Its canonical version asks how to pack items of different values and weights arriving online into a capacity-limited knapsack so as to maximize the total…