Related papers: Robust Hedging with Proportional Transaction Costs
This paper studies a type of periodic utility maximization problems for portfolio management in incomplete stochastic factor models with convex trading constraints. The portfolio performance is periodically evaluated on the relative ratio…
The paper develops general, discrete, non-probabilistic market models and minmax price bounds leading to price intervals for European options. The approach provides the trajectory based analogue of martingale-like properties as well as a…
We consider the fundamental theorem of asset pricing (FTAP) and hedging prices of options under non-dominated model uncertainty and portfolio constrains in discrete time. We first show that no arbitrage holds if and only if there exists…
A celebrated financial application of convex duality theory gives an explicit relation between the following two quantities: (i) The optimal terminal wealth $X^*(T) : = X_{\varphi^*}(T)$ of the problem to maximize the expected $U$-utility…
In this paper we study mean-variance hedging under the G-expectation framework. Our analysis is carried out by exploiting the G-martingale representation theorem and the related probabilistic tools, in a contin- uous financial market with…
Hedging exotic options in presence of market frictions is an important risk management task. Deep hedging can solve such hedging problems by training neural network policies in realistic simulated markets. Training these neural networks may…
Two probability distributions $\mu$ and $\nu$ in second stochastic order can be coupled by a supermartingale, and in fact by many. Is there a canonical choice? We construct and investigate two couplings which arise as optimizers for…
In this paper, a new approach for solving the problems of pricing and hedging derivatives is introduced in a general frictionless market setting. The method is applicable even in cases where an equivalent local martingale measure fails to…
A probabilistic method for solving the Monge-Kantorovich mass transport problem on $R^d$ is introduced. A system of empirical measures of independent particles is built in such a way that it obeys a doubly indexed large deviation principle…
This paper is devoted to a study of robust fundamental theorems of asset pricing in discrete time and finite horizon settings. Uncertainty is modelled by a (possibly uncountable) family of price processes on the same probability space. Our…
The pricing, hedging, optimal exercise and optimal cancellation of game or Israeli options are considered in a multi-currency model with proportional transaction costs. Efficient constructions for optimal hedging, cancellation and exercise…
Given the marginal distribution information of the underlying asset price at two future times $T_1$ and $T_2$, we consider the problem of determining a model-free upper bound on the price of a class of American options that must be…
We study the expected utility portfolio optimization problem in an incomplete financial market where the risky asset dynamics depend on stochastic factors and the portfolio allocation is constrained to lie within a given convex set. We…
Quadratic hedging of option payoffs generates the variance optimal martingale measure. When an option features an exercise policy and its cash flows are hedged according to this approach, it may be tempting to optimize such a policy under…
We apply rough-path theory to study the discrete-time gamma-hedging strategy. We show that if a trader knows that the market price of a set of European options will be given by a diffusive pricing model, then the discrete-time gamma-hedging…
Weak optimal transport generalizes the classical theory of optimal transportation to nonlinear cost functions and covers a range of problems that lie beyond the traditional theory - including entropic transport, martingale transport, and…
Conditional risk minimization arises in high-stakes decisions where risk must be assessed in light of side information, such as stressed economic conditions, specific customer profiles, or other contextual covariates. Constructing reliable…
The paper studies problem of continuous time optimal portfolio selection for a incom- plete market diffusion model. It is shown that, under some mild conditions, near optimal strategies for investors with different performance criteria can…
We study the convex duality method for robust utility maximization in the presence of a random endowment. When the underlying price process is a locally bounded semimartingale, we show that the fundamental duality relation holds true for a…
A common assumption in financial engineering is that the market price for any derivative coincides with an objectively defined risk-neutral price - a plausible assumption only if traders collectively possess objective knowledge about the…