Related papers: Incorporating Views on Market Dynamics in Options …
We revisit the well-studied superhedging problem under proportional transaction costs in continuous time using the recently developed tools of set-valued stochastic analysis. By relying on a simple Black-Scholes-type market model for…
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…
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 problem of option hedging in a market with proportional transaction costs. Since super-replication is very costly in such markets, we replace perfect hedging with an expected loss constraint. Asymptotic analysis for small…
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 this paper, we argue that, once the costs of maintaining the hedging portfolio are properly taken into account, semi-static portfolios should more properly be thought of as separate classes of derivatives, with non-trivial,…
In this work we present a new family of options (mirror options) specially crafted to satisfy the necessities of aggressive speculators. The main ideas behind mirror options are: 1) A product that can be adjusted by the holder to agree with…
Along with the advance of opinion mining techniques, public mood has been found to be a key element for stock market prediction. However, how market participants' behavior is affected by public mood has been rarely discussed. Consequently,…
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…
The collateral choice option allows a collateral-posting party the opportunity to change the type of security in which the collateral is deposited. Due to non-zero collateral basis spreads, this optionality significantly impacts asset…
Delta hedging, which plays a crucial r\^ole in modern financial engineering, is a tracking control design for a "risk-free" management. We utilize the existence of trends in financial time series (Fliess M., Join C.: A mathematical proof of…
Fluctuations in stock prices are influenced by a complex interplay of factors that go beyond mere historical data. These factors, themselves influenced by external forces, encompass inter-stock dynamics, broader economic factors, various…
We show how D4PG can be used in conjunction with quantile regression to develop a hedging strategy for a trader responsible for derivatives that arrive stochastically and depend on a single underlying asset. We assume that the trader makes…
We consider insurance derivatives depending on an external physical risk process, for example a temperature in a low dimensional climate model. We assume that this process is correlated with a tradable financial asset. We derive optimal…
Numerous empirical proofs indicate the adequacy of the time discrete auto-regressive stochastic volatility models introduced by Taylor in the description of the log-returns of financial assets. The pricing and hedging of contingent products…
The Black-Litterman model extends the framework of the Markowitz Modern Portfolio Theory to incorporate investor views. We consider a case where multiple view estimates, including uncertainties, are given for the same underlying subset of…
We propose an alternative approach towards cost mitigation in volatility-managed portfolios based on smoothing the predictive density of an otherwise standard stochastic volatility model. Specifically, we develop a novel variational Bayes…
In the paper we develop mathematical tools of quantile hedging in incomplete market. Those could be used for two significant applications: o calculating the \textbf{optimal capital requirement imposed by Solvency II} (Directive 2009/138/EC…
In the market place, diversification reduces risk and provides protection against extreme events by ensuring that one is not overly exposed to individual occurrences. We argue that diversification is best measured by characteristics of the…
We propose a new method of measuring the third and fourth moments of return distribution based on quadratic variation method when the return process is assumed to have zero drift. The realized third and fourth moments variations computed…