Related papers: Hedging Conditional Value at Risk with Options

We present a method for hedging in continuous time.

We consider the problem of ESO valuation in continuous time. In particular, we consider models that assume that an appropriate random time serves as a proxy for anything that causes the ESO's holder to exercise the option early, namely,…

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…

The question of pricing and hedging a given contingent claim has a unique solution in a complete market framework. When some incompleteness is introduced, the problem becomes however more difficult. Several approaches have been adopted in…

We consider the portfolio optimization with risk measured by conditional value-at-risk, based on the stress event of chosen asset being equal to the opposite of its value-at-risk level, under the normality assumption. Solvability conditions…

Hedging in the presence of transaction costs leads to complex optimization problems. These problems typically lack closed-form solutions, and their implementation relies on numerical methods that provide hedging strategies for specific…

In this work, I address the issue of forming riskless hedge in the continuous time option pricing model with stochastic stock volatility. I show that it is essential to verify whether the replicating portfolio is self-financing, in order…

Changes in market conditions present challenges for investors as they cause performance to deviate from the ranges predicted by long-term averages of means and covariances. The aim of conditional asset allocation strategies is to overcome…

We consider as given a discrete time financial market with a risky asset and options written on that asset and determine both the sub- and super-hedging prices of an American option in the model independent framework of ArXiv:1305.6008. We…

We model investor heterogeneity using different required returns on an investment and evaluate the impact on the valuation of an investment. By assuming no disagreement on the cash flows, we emphasize how risk preferences in particular, but…

Duality for robust hedging with proportional transaction costs of path dependent European options is obtained in a discrete time financial market with one risky asset. Investor's portfolio consists of a dynamically traded stock and a static…

Hedging exotic options in presence of market frictions is an important risk management task. Deep hedging can solve such hedging problems by training neural network policies in realistic simulated markets. Training these neural networks may…

This paper focuses on the valuation and hedging of gas storage facilities, using a spot-based valuation framework coupled with a financial hedging strategy implemented with futures contracts. The first novelty consist in proposing a model…

We consider robust pricing and hedging for options written on multiple assets given market option prices for the individual assets. The resulting problem is called the multi-marginal martingale optimal transport problem. We propose two…

The two main issues for managing wrong way risk (WWR) for the credit valuation adjustment (CVA, i.e. WW-CVA) are calibration and hedging. Hence we start from a novel model-free worst-case approach based on static hedging of counterparty…

We propose a versatile Monte-Carlo method for pricing and hedging options when the market is incomplete, for an arbitrary risk criterion (chosen here to be the expected shortfall), for a large class of stochastic processes, and in the…

We study a market model in which the volatility of the stock may jump at a random time from a fixed value to another fixed value. This model was already described in the literature. We present a new approach to the problem, based on partial…

We propose a flexible framework for hedging a contingent claim by holding static positions in vanilla European calls, puts, bonds, and forwards. A model-free expression is derived for the optimal static hedging strategy that minimizes the…

In this paper, we combine modern portfolio theory and option pricing theory so that a trader who takes a position in a European option contract and the underlying assets can construct an optimal portfolio such that at the moment of the…

In this paper we show how risk-averse reinforcement learning can be used to hedge options. We apply a state-of-the-art risk-averse algorithm: Trust Region Volatility Optimization (TRVO) to a vanilla option hedging environment, considering…