Related papers: Asymptotic replication with modified volatility un…
We propose some machine-learning-based algorithms to solve hedging problems in incomplete markets. Sources of incompleteness cover illiquidity, untradable risk factors, discrete hedging dates and transaction costs. The proposed algorithms…
In this paper, we study the portfolio optimization problem with general utility functions and when the return and volatility of underlying asset are slowly varying. An asymptotic optimal strategy is provided within a specific class of…
The duality between the robust (or equivalently, model independent) hedging of path dependent European options and a martingale optimal transport problem is proved. The financial market is modeled through a risky asset whose price is only…
We derive the short-maturity asymptotics for Asian option prices in local-stochastic volatility (LSV) models. Both out-of-the-money (OTM) and at-the-money (ATM) asymptotics are considered. Using large deviations theory methods, the…
This paper deals with the problem of discrete-time option pricing by the mixed fractional version of Merton model with transaction costs. By a mean-self-financing delta hedging argument in a discrete-time setting, a European call option…
The cryptocurrency market is volatile, non-stationary and non-continuous. Together with liquid derivatives markets, this poses a unique opportunity to study risk management, especially the hedging of options, in a turbulent market. We study…
We study the pricing problem for a European call option when the volatility of the underlying asset is random and follows the exponential Ornstein-Uhlenbeck model. The random diffusion model proposed is a two-dimensional market process that…
We present an algorithm producing a dynamic non-self-financing hedging strategy in an incomplete market corresponding to investor-relevant risk criterion. The optimization is a two stage process that first determines admissible model…
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…
In this paper, we price European Call three different option pricing models, where the volatility is dynamically changing i.e. non constant. In stochastic volatility (SV) models for option pricing a closed form approximation technique is…
In the context of a locally risk-minimizing approach, the problem of hedging defaultable claims and their Follmer-Schweizer decompositions are discussed in a structural model. This is done when the underlying process is a finite variation…
It is shown that delta hedging provides the optimal trading strategy in terms of minimal required initial capital to replicate a given terminal payoff in a continuous-time Markovian context. This holds true in market models where no…
We consider stochastic volatility models under parameter uncertainty and investigate how model derived prices of European options are affected. We let the pricing parameters evolve dynamically in time within a specified region, and…
We study super-replication of contingent claims in an illiquid market with model uncertainty. Illiquidity is captured by nonlinear transaction costs in discrete time and model uncertainty arises as our only assumption on stock price returns…
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 superhedging price of an exotic option under nondominated model uncertainty in discrete time in which the option buyer chooses some action from an (uncountable) action space at each time step. By introducing an enlarged…
This paper mainly discusses the American option's hedging strategies via binomialmodel and the basic idea of pricing and hedging American option. Although the essential scheme of hedging is almost the same as European option, small…
We propose a reference-free learning model predictive controller for periodic repetitive tasks. We consider a problem in which dynamics, constraints and stage cost are periodically time-varying. The controller uses the closed-loop data to…
We develop robust pricing and hedging of a weighted variance swap when market prices for a finite number of co--maturing put options are given. We assume the given prices do not admit arbitrage and deduce no-arbitrage bounds on the weighted…
This paper investigates the hedging effectiveness of a dynamic moving window OLS hedging model, formed using wavelet decomposed time-series. The wavelet transform is applied to calculate the appropriate dynamic minimum-variance hedge ratio…