Related papers: Variance optimal hedging for continuous time addit…
We reconsider the variational integration of optimal control problems for mechanical systems based on a direct discretization of the Lagrange-d'Alembert principle. This approach yields discrete dynamical constraints which by construction…
This paper presents hedging strategies for European and exotic options in a Levy market. By applying Taylor's Theorem, dynamic hedging portfolios are con- structed under different market assumptions, such as the existence of power jump…
We propose a new `hedged' Monte-Carlo (HMC) method to price financial derivatives, which allows to determine simultaneously the optimal hedge. The inclusion of the optimal hedging strategy allows one to reduce the financial risk associated…
We consider a problem of replication of random vectors by ordinary integrals in the setting when a underlying random variable is generated by a Wiener process. The goal is to find an optimal adapted process such that its cumulative integral…
In random allocation rules, typically first an optimal fractional point is calculated via solving a linear program. The calculated point represents a fractional assignment of objects or more generally packages of objects to agents. In order…
We consider hedging of a contingent claim by a 'semi-static' strategy composed of a dynamic position in one asset and static (buy-and-hold) positions in other assets. We give general representations of the optimal strategy and the hedging…
We expose a theoretical hedging optimization framework with variational preferences under convex risk measures. We explore a general dual representation for the composition between risk measures and utilities. We study the properties of the…
We examine the \emph{submodular maximum coverage problem} (SMCP), which is related to a wide range of applications. We provide the first variational approximation for this problem based on the Nemhauser divergence, and show that it can be…
In this paper we propose a novel pricing-hedging framework for volatility derivatives which simultaneously takes into account rough volatility and volatility jumps. Our model directly targets the instantaneous variance of a risky asset and…
We consider a utility maximization problem in a broad class of markets. Apart from traditional semimartingale markets, our class of markets includes processes with long memory, fractional Brownian motion and related processes, and, in…
We study utility indifference prices and optimal purchasing quantities for a contingent claim, in an incomplete semi-martingale market, in the presence of vanishing hedging errors and/or risk aversion. Assuming that the average indifference…
We apply the concepts of utility based pricing and hedging of derivatives in stochastic volatility markets and introduce a new class of "reciprocal affine" models for which the indifference price and optimal hedge portfolio for pure…
Building on the work of Schweizer (1995) and Cern and Kallseny (2007), we present discrete time formulas minimizing the mean square hedging error for multidimensional assets. In particular, we give explicit formulas when a regime-switching…
The present paper extends the classical second-order variational problem of Herglotz type to the more general context of the Euclidean sphere S^n following variational and optimal control approaches. The relation between the Hamiltonian…
We discuss the pricing and hedging of volatility options in some rough volatility models. First, we develop efficient Monte Carlo methods and asymptotic approximations for computing option prices and hedge ratios in models where…
An investor faced with a contingent claim may eliminate risk by perfect hedging, but as it is often quite expensive, he seeks partial hedging (quantile hedging or efficient hedging) that requires less capital and reduces the risk. Efficient…
This paper studies first-order algorithms for solving fully composite optimization problems over convex and compact sets. We leverage the structure of the objective by handling its differentiable and non-differentiable components…
The paper investigates two inertial extragradient algorithms for seeking a common solution to a variational inequality problem involving a monotone and Lipschitz continuous mapping and a fixed point problem with a demicontractive mapping in…
We consider the classical optimal dividends problem under the Cram\'er-Lundberg model with exponential claim sizes subject to a constraint on the time of ruin. We introduce the dual problem and show that the complementary slackness…
Switching dynamical systems provide a powerful, interpretable modeling framework for inference in time-series data in, e.g., the natural sciences or engineering applications. Since many areas, such as biology or discrete-event systems, are…