Related papers: The dual optimizer for the growth-optimal portfoli…
An option market maker incurs funding costs when carrying and hedging inventory. To hedge a net long delta inventory, for example, she pays a fee to borrow stock from the securities lending market. Because of haircuts, she posts additional…
This paper addresses the question of how to invest in a robust growth-optimal way in a market where the instantaneous expected return of the underlying process is unknown. The optimal investment strategy is identified using a generalized…
This paper studies duality and optimality conditions in general convex stochastic optimization problems introduced by Rockafellar and Wets in 1976. We derive an explicit dual problem in terms of two dual variables, one of which is the…
For an exponential utility maximizing investment strategy in a Black-Scholes Setting, fixed upper and lower constraints are introduced on the terminal wealth. This is equivalent to combining the optimal strategy with options. The resulting…
A hypothetical risk-neutral agent who trades to maximize the expected profit of the next trade will approximately exhibit long-term optimal behavior as long as this agent uses the vector $p = \nabla V (t, x)$ as effective microstructure…
The aim of this article is to propose a core game theory model of transaction costs wherein it is indicated how direct costs determine the probability of loss and subsequent transaction costs. The existence of optimum is proven, and the way…
This paper studies the continuous time utility maximization problem on consumption with addictive habit formation in incomplete semimartingale markets. Introducing the set of auxiliary state processes and the modified dual space, we embed…
We consider the problem of optimal consumption of multiple goods in incomplete semimartingale markets. We formulate the dual problem and identify conditions that allow for existence and uniqueness of the solution and give a characterization…
We present an optimal investment theorem for a currency exchange model with random and possibly discontinuous proportional transaction costs. The investor's preferences are represented by a multivariate utility function, allowing for…
We consider robust utility maximisation in continuous-time financial markets with proportional transaction costs under model uncertainty. For this purpose, we work in the framework of Chau and R\'asonyi (2019), where robustness is achieved…
In this paper we propose a closed-form approximation for the price of basket options under a multivariate Black-Scholes model, based on Taylor expansions and the calculation of mixed exponential-power moments of a Gaussian distribution. Our…
This study investigates an optimal consumption--investment problem in which the unobserved stock trend is modulated by a hidden Markov chain that represents different economic regimes. In the classical approach, the hidden state is…
Option contracts can be valued by using the Black-Scholes equation, a partial differential equation with initial conditions. An exact solution for European style options is known. The computation time and the error need to be minimized…
Duality for robust hedging with proportional transaction costs of path dependent European options is obtained in a discrete time financial market with one risky asset. Investor's portfolio consists of a dynamically traded stock and a static…
This paper concerns the design of a Fourier based pseudospectral numerical method for the model of European Option Pricing with transaction costs under Exponential Utility derived by Davis, Panas and Zariphopoulou. Computing the option…
We consider the pricing problem related to payoffs that can have discontinuities of polynomial growth. The asset price dynamic is modeled within the Black and Scholes framework characterized by a stochastic volatility term driven by a…
Option contracts can be valued by using the Black-Scholes equation, a partial differential equation with initial conditions. An exact solution for European style options is known. The computation time and the error need to be minimized…
We consider an agent who has access to a financial market, including derivative contracts, who looks to maximise her utility. Whilst the agent looks to maximise utility over one probability measure, or class of probability measures, she…
We revisit optimal execution of an active portfolio in the presence of slippage (aka linear, proportional, or absolute-value) costs. Market efficiency implies a close balance between active alphas and trading costs, so even small changes to…
We establish a rigorous duality theory, under No Unbounded Profit with Bounded Risk, for an infinite horizon problem of optimal consumption in the presence of an income stream that can terminate randomly at an exponentially distributed…