Related papers: Utility based pricing and hedging of jump diffusio…
Model-based process simulation can be used to derive designs and operating conditions of chemical processes that optimally balance multiple objectives, such as quality, costs, or environmental impacts. This work focuses on identifying…
This paper studies the optimal investment problem with random endowment in an inventory-based price impact model with competitive market makers. Our goal is to analyze how price impact affects optimal policies, as well as both pricing rules…
A truncated sequential procedure is constructed for estimating the drift coefficient at a given state point based on discrete data of ergodic diffusion process. A nonasymptotic upper bound is obtained for a pointwise absolute error risk.…
Utility based methods provide a very general theoretically consistent approach to pricing and hedging of securities in incomplete financial markets. Solving problems in the utility based framework typically involves dynamic programming,…
We consider stochastic control with discretionary stopping for the drift of a diffusion process over an infinite time horizon. The objective is to choose a control process and a stopping time to minimize the expectation of a convex terminal…
In this paper, we combine modern portfolio theory and option pricing theory so that a trader who takes a position in a European option contract and the underlying assets can construct an optimal portfolio such that at the moment of the…
We prove results on bounded solutions to backward stochastic equations driven by random measures. Those bounded BSDE solutions are then applied to solve different stochastic optimization problems with exponential utility in models where the…
We investigate the utility in employing asymptotic results related to a clustering criterion to the problem of testing for the presence of jumps in financial models. We consider the Jump Diffusion model for option pricing and demonstrate…
For utility functions $u$ finite valued on $\mathbb{R}$, we prove a duality formula for utility maximization with random endowment in general semimartingale incomplete markets. The main novelty of the paper is that possibly non locally…
We study robust notions of good-deal hedging and valuation under combined uncertainty about the drifts and volatilities of asset prices. Good-deal bounds are determined by a subset of risk-neutral pricing measures such that not only…
We propose a deep learning approach to study the minimal variance pricing and hedging problem in an incomplete jump diffusion market. It is based upon a rigorous stochastic calculus derivation of the optimal hedging portfolio, optimal…
We consider a discrete time financial market with proportional transaction costs under model uncertainty, and study a num\'eraire-based semi-static utility maximization problem with an exponential utility preference. The randomization…
This paper considers a portfolio optimization problem in which asset prices are represented by SDEs driven by Brownian motion and a Poisson random measure, with drifts that are functions of an auxiliary diffusion factor process. The…
We study a general robust utility maximization problem in a discrete-time frictionless market. The investor is assumed to have a possibly infinite, random, nonconcave, and nondecreasing utility function defined on the whole real line. She…
In this paper we propose a semi-analytic approach to pricing American options for time-dependent jump-diffusions models with exponential jumps The idea of the method is to further generalize our approach developed for pricing barrier,…
Prediction markets are long known for prediction accuracy. This study systematically explores the fundamental properties of prediction markets, addressing questions about their information aggregation process and the factors contributing to…
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…
This paper studies the utility maximization on the terminal wealth with random endowments and proportional transaction costs. To deal with unbounded random payoffs from some illiquid claims, we propose to work with the acceptable portfolios…
It is well known that the minimal superhedging price of a contingent claim is too high for practical use. In a continuous-time model uncertainty framework, we consider a relaxed hedging criterion based on acceptable shortfall risks.…
Deep hedging is a framework for hedging derivatives in the presence of market frictions. In this study, we focus on the problem of hedging a given target option by using multiple options. To extend the deep hedging framework to this…