Related papers: Optimal robust bounds for variance options
In this paper we consider a variation of the Merton's problem with added stochastic volatility and finite time horizon. It is known that the corresponding optimal control problem may be reduced to a linear parabolic boundary problem under…
We study the problem of dynamically trading a futures contract and its underlying asset under a stochastic basis model. The basis evolution is modeled by a stopped scaled Brownian bridge to account for non-convergence of the basis at…
Pricing financial or real options with arbitrary payoffs in regime-switching models is an important problem in finance. Mathematically, it is to solve, under certain standard assumptions, a general form of optimal stopping problems in…
We consider a nonatomic selfish routing model with independent stochastic travel times, represented by mean and variance latency functions for each edge that depend on their flows. In an effort to decouple the effect of risk-averse player…
We consider the problem of superhedging under volatility uncertainty for an investor allowed to dynamically trade the underlying asset, and statically trade European call options for all possible strikes with some given maturity. This…
We study American swaptions in the linear-rational (LR) term structure model introduced in [5]. The American swaption pricing problem boils down to an optimal stopping problem that is analytically tractable. It reduces to a free-boundary…
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…
We consider the problem of finding model-independent bounds on the price of an Asian option, when the call prices at the maturity date of the option are known. Our methods differ from most approaches to model-independent pricing in that we…
We present a semi-static hedging algorithm for callable interest rate derivatives under an affine, multi-factor term-structure model. With a traditional dynamic hedge, the replication portfolio needs to be updated continuously through time…
We introduce a novel and highly tractable supervised learning approach based on neural networks that can be applied for the computation of model-free price bounds of, potentially high-dimensional, financial derivatives and for the…
Derivatives on the Chicago Board Options Exchange volatility index (VIX) have gained significant popularity over the last decade. The pricing of VIX derivatives involves evaluating the square root of the expected realised variance which…
In this article we present a general framework for non-concave robust stochastic control problems under model uncertainty in a discrete time finite horizon setting. Our framework allows to consider a variety of different path-dependent…
We examine fixed-price mechanisms in bilateral trade through the lens of regret minimization. Our main results are twofold. (i) For independent values, a near-optimal $\widetilde{\Theta}(T^{2/3})$ tight bound for $\textsf{Global Budget…
Price determination is a central research topic of revenue management in marketing. The important aspect in pricing is controlling the stochastic behavior of demand, and the previous studies have tackled price optimization problems with…
In this chapter we first briefly review the existing approaches to hedging in rough volatility models. Next, we present a simple but general result which shows that in a one-factor rough stochastic volatility model, any option may be…
We consider the pricing of variable annuities (VAs) with general fee structures under popular stochastic volatility models such as Heston, Hull-White, Scott, $\alpha$-Hypergeometric, $3/2$, and $4/2$ models. In particular, we analyze the…
A classical problem in ergodic continuous time control consists of studying the limit behavior of the optimal value of a discounted cost functional with infinite horizon as the discount factor $\lambda$ tends to zero. In the literature,…
Solving optimal stopping problems by backward induction in high dimensions is often very complex since the computation of conditional expectations is required. Typically, such computations are based on regression, a method that suffers from…
We study the problem of option pricing and hedging strategies within the frame-work of risk-return arguments. An economic agent is described by a utility function that depends on profit (an expected value) and risk (a variance). In the…
We study an optimal stopping problem with an unbounded, time-dependent and discontinuous reward function. This problem is motivated by the pricing of a variable annuity contract with guaranteed minimum maturity benefit, under the assumption…