Related papers: Hedging under multiple risk constraints
This paper studies a robust continuous-time Markowitz portfolio selection pro\-blem where the model uncertainty carries on the covariance matrix of multiple risky assets. This problem is formulated into a min-max mean-variance problem over…
We consider the problem of portfolio optimization with a correlation constraint. The framework is the multiperiod stochastic financial market setting with one tradable stock, stochastic income and a non-tradable index. The correlation…
Progressive Hedging is a popular decomposition algorithm for solving multi-stage stochastic optimization problems. A computational bottleneck of this algorithm is that all scenario subproblems have to be solved at each iteration. In this…
Excessive leverage, i.e. the abuse of debt financing, is considered one of the primary factors in the default of financial institutions. Systemic risk results from correlations between individual default probabilities that cannot be…
In this work, we consider the optimal portfolio selection problem under hard constraints on trading amounts, transaction costs and different rates for borrowing and lending when the risky asset returns are serially correlated. No…
Default risk calculus plays a crucial role in portfolio optimization when the risky asset is under threat of bankruptcy. However, traditional stochastic control techniques are not applicable in this scenario, and additional assumptions are…
Electric power systems are increasingly turning to energy storage systems to balance supply and demand. But how much storage is required? What is the optimal volume of storage in a power system and on what does it depend? In addition, what…
We extend the classical risk minimization model with scalar risk measures to the general case of set-valued risk measures. The problem we obtain is a set-valued optimization model and we propose a goal programming-based approach with…
In this paper we study the optimal investment and reinsurance problem of an insurance company whose investment preferences are described via a forward dynamic exponential utility in a regime-switching market model. Financial and actuarial…
Benchmarks in the utility function have various interpretations, including performance guarantees and risk constraints in fund contracts and reference levels in cumulative prospect theory. In most literature, benchmarks are a deterministic…
A widely used heuristic for solving stochastic optimization problems is to use a deterministic rolling horizon procedure, which has been modified to handle uncertainty (e.g. buffer stocks, schedule slack). This approach has been criticized…
This article clarifies the relationship between pricing kernel monotonicity and the existence of opportunities for stochastic arbitrage in a complete and frictionless market of derivative securities written on a market portfolio. The…
We study the expected utility portfolio optimization problem in an incomplete financial market where the risky asset dynamics depend on stochastic factors and the portfolio allocation is constrained to lie within a given convex set. We…
One of the crucial problems in mathematical finance is to mitigate the risk of a financial position by setting up hedging positions of eligible financial securities. This leads to focusing on set-valued maps associating to any financial…
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…
This paper investigates the problem of maximizing expected terminal utility in a discrete-time financial market model with a finite horizon under non-dominated model uncertainty. We use a dynamic programming framework together with…
Building on the functional-analytic framework of operator-valued kernels and un-truncated signature kernels, we propose a scalable, provably convergent signature-based algorithm for a broad class of high-dimensional, path-dependent hedging…
We investigate the optimal investment-reinsurance problem for insurance company with partial information on the market price of the risk. Through the use of filtering techniques we convert the original optimization problem involving…
This paper studies a type of periodic utility maximization problems for portfolio management in incomplete stochastic factor models with convex trading constraints. The portfolio performance is periodically evaluated on the relative ratio…
We present a method for finding optimal hedging policies for arbitrary initial portfolios and market states. We develop a novel actor-critic algorithm for solving general risk-averse stochastic control problems and use it to learn hedging…