Related papers: Optimal execution comparison across risks and dyna…
Portfolio selection problems that optimize expected utility are usually difficult to solve. If the number of assets in the portfolio is large, such expected utility maximization problems become even harder to solve numerically. Therefore,…
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 consider an investor that trades continuously and wants to liquidate an initial asset position within a prescribed time interval. During the execution of the liquidation order the investor is subject to execution risk. We study the…
The question of pricing and hedging a given contingent claim has a unique solution in a complete market framework. When some incompleteness is introduced, the problem becomes however more difficult. Several approaches have been adopted in…
In this paper we propose a refracted skew Brownian motion as a risk model with endogenous regime switching, which generalizes the refracted diffusion risk process introduced by Gerber and Shiu. We consider an optimal dividend problem for…
When applying the finite-differences method to numerically solve the one-dimensional diffusion equation, one must choose discretization steps $\Delta x$, $\Delta t$ in space and time, respectively. By applying large-deviation theory on the…
We consider the problem of an agent who faces losses in continuous time over a finite time horizon and may choose to share some of these losses with a counterparty. The agent is uncertain about the true loss distribution and has multiple…
The paper studies derivative asset analysis in structural credit risk models where the asset value of the firm is not fully observable. It is shown that in order to compute the price dynamics of traded securities one needs to solve a…
The movement of a particle described by Brownian motion is quantified by a single parameter, $D$, the diffusion constant. The estimation of $D$ from a discrete sequence of noisy observations is a fundamental problem in biological single…
We study the problem of dynamically trading futures in a regime-switching market. Modeling the underlying asset price as a Markov-modulated diffusion process, we present a utility maximization approach to determine the optimal futures…
In this note we prove sharp lower error bounds for numerical methods for jump-diffusion stochastic differential equations (SDEs) with discontinuous drift. We study the approximation of jump-diffusion SDEs with non-adaptive as well as…
We study reinforcement learning for controlled diffusion processes with unbounded continuous state spaces, bounded continuous actions, and polynomially growing rewards: settings that arise naturally in finance, economics, and operations…
We consider the optimal risk transfer from an insurance company to a reinsurer. The problem formulation considered in this paper is closely connected to the optimal portfolio problem in finance, with some crucial distinctions. In…
This paper investigates performance attribution measures as a basis for constraining portfolio optimization. We employ optimizations that minimize expected tail loss and investigate both asset allocation (AA) and the selection effect (SE)…
In this paper, we study the optimal investment problem of an insurer whose surplus process follows the diffusion approximation of the classical Cramer-Lundberg model. Investment in the foreign market is allowed, and therefore, the foreign…
In this paper, we model the cash surplus (or equity) of a risky business with a Brownian motion. Owners can take cash out of the surplus in the form of "dividends", subject to transaction costs. However, if the surplus hits 0 then ruin…
The use of non-translation invariant risk measures within the equal risk pricing (ERP) methodology for the valuation of financial derivatives is investigated. The ability to move beyond the class of convex risk measures considered in…
We investigate the well-posedness in the Hadamard sense and the absence of price manipulation in the optimal execution problem within the Almgren-Chriss framework, where the temporary and permanent impact parameters vary deterministically…
Recent advances in diffusion models have demonstrated their strong capabilities in generating high-fidelity samples from complex distributions through an iterative refinement process. Despite the empirical success of diffusion models in…
We present a method for obtaining approximate solutions to the problem of optimal execution, based on a signature method. The framework is general, only requiring that the price process is a geometric rough path and the price impact…