Related papers: Hedging under multiple risk constraints
Utility based methods provide a very general theoretically consistent approach to pricing and hedging of securities in incomplete financial markets. Solving problems in the utility based framework typically involves dynamic programming,…
We consider a portfolio optimization problem in a defaultable market with finitely-many economical regimes, where the investor can dynamically allocate her wealth among a defaultable bond, a stock, and a money market account. The market…
We propose a hedging approach for general contingent claims when liquidity is a concern and trading is subject to transaction cost. Multiple assets with different liquidity levels are available for hedging. Our risk criterion targets a…
In academic literature portfolio risk management and hedging are often versed in the language of stochastic control and Hamilton--Jacobi--Bellman~(HJB) equations in continuous time. In practice the continuous-time framework of stochastic…
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…
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…
In portfolio optimization, decision makers face difficulties from uncertainties inherent in real-world scenarios. These uncertainties significantly influence portfolio outcomes in both classical and multi-objective Markowitz models. To…
A drawdown constraint forces the current wealth to remain above a given function of its maximum to date. We consider the portfolio optimisation problem of maximising the long-term growth rate of the expected utility of wealth subject to a…
In this paper, we consider the problem of optimization of a portfolio consisting of securities. An investor with an initial capital, is interested in constructing a portfolio of securities. If the prices of securities change, the investor…
We consider the problem of optimal hedging in an incomplete market with an established pricing kernel. In such a market, prices are uniquely determined, but perfect hedges are usually not available. We work in the rather general setting of…
We provide analytical results for a static portfolio optimization problem with two coherent risk measures. The use of two risk measures is motivated by joint decision-making for portfolio selection where the risk perception of the portfolio…
In this paper we investigate the hedging problem of a unit-linked life insurance contract via the local risk-minimization approach, when the insurer has a restricted information on the market. In particular, we consider an endowment…
This thesis investigates Merton's portfolio problem under two different rough Heston models, which have a non-Markovian structure. The motivation behind this choice of problem is due to the recent discovery and success of rough volatility…
Energy storage promotes the integration of renewables by operating with charge and discharge policies that balance an intermittent power supply. A key challenge in this emerging sector is how to optimize the operation of storage assets…
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 determine the variance-optimal hedge when the logarithm of the underlying price follows a process with stationary independent increments in discrete or continuous time. Although the general solution to this problem is known as backward…
We derive new results related to the portfolio choice problem for power and logarithmic utilities. Assuming that the portfolio returns follow an approximate log-normal distribution, the closed-form expressions of the optimal portfolio…
We study the pricing and the hedging of claim {\psi} which depends on the default times of two firms A and B. In fact, we assume that, in the market, we can not buy or sell any defaultable bond of the firm B but we can only trade…
We present a new approach for studying the problem of optimal hedging of a European option in a finite and complete discrete-time market model. We consider partial hedging strategies that maximize the success probability or minimize the…
In this paper, we consider a financial market with assets exposed to some risks inducing jumps in the asset prices, and which can still be traded after default times. We use a default-intensity modeling approach, and address in this…