Related papers: Hedging under an expected loss constraint with sma…
The classical optimal investment and consumption problem with infinite horizon is studied in the presence of transaction costs. Both proportional and fixed costs as well as general utility functions are considered. Weak dynamic programming…
Within a financial model with linear price impact, we study the problem of hedging a covered European option under gamma constraint. Using stochastic target and partial differential equation smoothing techniques, we prove that the…
In Electricity markets, illiquidity, transaction costs and market price characteristics prevent managers to replicate exactly contracts. A residual risk is always present and the hedging strategy depends on a risk criterion chosen. We…
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.…
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…
In most real scenarios the construction of a risk-neutral portfolio must be performed in discrete time and with transaction costs. Two human imposed constraints are the risk-aversion and the profit maximization, which together define a…
We consider fractional Black-Scholes market with proportional transaction costs. When transaction costs are present, one trades periodically i.e. we have the discrete trading with equidistance $n^{-1}$ between trading times. We derive a non…
Sharp asymptotic lower bounds of the expected quadratic variation of discretization error in stochastic integration are given. The theory relies on inequalities for the kurtosis and skewness of a general random variable which are themselves…
We study an American option pricing problem with liquidity risks and transaction fees. As endogenous transaction costs, liquidity risks of the underlying asset are modeled by a mean-reverting process. Transaction fees are exogenous…
We consider the pricing and hedging of exotic options in a model-independent set-up using \emph{shortfall risk and quantiles}. We assume that the marginal distributions at certain times are given. This is tantamount to calibrating the model…
We consider indifference pricing of contingent claims consisting of payment flows in a discrete time model with proportional transaction costs and under exponential disutility. This setting covers utility maximisation as a special case. A…
We consider an optimal investment problem to maximize expected utility of the terminal wealth, in an illiquid market with search frictions and transaction costs. In the market model, an investor's attempt of transaction is successful only…
We propose a constructive framework for the super-hedging problem of a European contingent claim under proportional transaction costs in discrete time. Our main contribution is an explicit recursive scheme that computes both the…
The studied model was suggested to design a perfect hedging strategy for a large trader. In this case the implementation of a hedging strategy affects the price of the underlying security. The feedback-effect leads to a nonlinear version of…
Discrete time hedging in a complete diffusion market is considered. The hedge portfolio is rebalanced when the absolute difference between delta of the hedge portfolio and the derivative contract reaches a threshold level. The rate of…
We consider the problem of hedging a European contingent claim in a Bachelier model with transient price impact as proposed by Almgren and Chriss. Following the approach of Rogers and Singh and Naujokat and Westray, the hedging problem can…
In the context of the multi-dimensional infinite horizon optimal consumption-investment problem with proportional transaction costs, we provide the first order expansion in small transact costs. Similar to the one-dimensional derivation in…
We consider the discretized Bachelier model where hedging is done on an equidistant set of times. Exponential utility indifference prices are studied for path-dependent European options and we compute their non-trivial scaling limit for a…
Explicit robust hedging strategies for convex or concave payoffs under a continuous semimartingale model with uncertainty and small transaction costs are constructed. In an asymptotic sense, the upper and lower bounds of the cumulative…
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…