Related papers: Arbitrage, hedging and utility maximization using …

This paper studies a type of periodic utility maximization for portfolio management in an incomplete market model, where the underlying price diffusion process depends on some external stochastic factors. The portfolio performance is…

We consider an optimal investment-consumption problem for a utility-maximizing investor who has access to assets with different liquidity and whose consumption rate as well as terminal wealth are subject to lower-bound constraints. Assuming…

We provide a model-free pricing-hedging duality in continuous time. For a frictionless market consisting of $d$ risky assets with continuous price trajectories, we show that the purely analytic problem of finding the minimal superhedging…

We develop a robust framework for pricing and hedging of derivative securities in discrete-time financial markets. We consider markets with both dynamically and statically traded assets and make minimal measurability assumptions. We obtain…

This article considers the pricing and hedging of a call option when liquidity matters, that is, either for a large nominal or for an illiquid underlying asset. In practice, as opposed to the classical assumptions of a price-taking agent in…

An investor with constant absolute risk aversion trades a risky asset with general It\^o-dynamics, in the presence of small proportional transaction costs. In this setting, we formally derive a leading-order optimal trading policy and the…

We consider an infinite dimensional optimization problem motivated by mathematical economics. Within the celebrated "Arbitrage Pricing Model", we use probabilistic and functional analytic techniques to show the existence of optimal…

We revisit optimal execution of an active portfolio in the presence of slippage (aka linear, proportional, or absolute-value) costs. Market efficiency implies a close balance between active alphas and trading costs, so even small changes to…

In this paper we report further progress towards a complete theory of state-independent expected utility maximization with semimartingale price processes for arbitrary utility function. Without any technical assumptions we establish a…

We consider infinite dimensional optimization problems motivated by the financial model called Arbitrage Pricing Theory. Using probabilistic and functional analytic tools, we provide a dual characterization of the super-replication cost.…

We introduce a new approach for the numerical pricing of American options. The main idea is to choose a finite number of suitable excessive functions (randomly) and to find the smallest majorant of the gain function in the span of these…

We consider the hedging error of a derivative due to discrete trading in the presence of a drift in the dynamics of the underlying asset. We suppose that the trader wishes to find rebalancing times for the hedging portfolio which enable him…

We present an optimal investment theorem for a currency exchange model with random and possibly discontinuous proportional transaction costs. The investor's preferences are represented by a multivariate utility function, allowing for…

We consider the problem of maximizing expected utility from consumption in a constrained incomplete semimartingale market with a random endowment process, and establish a general existence and uniqueness result using techniques from convex…

Semi-static trading strategies make frequent appearances in mathematical finance, where dynamic trading in a liquid asset is combined with static buy-and-hold positions in options on that asset. We show that the space of outcomes of such…

We consider the Brownian market model and the problem of expected utility maximization of terminal wealth. We, specifically, examine the problem of maximizing the utility of terminal wealth under the presence of transaction costs of a…

It turns out that in the bivariate Black-Scholes economy Margrabe type options exhibit symmetry properties leading to semi-static hedges of rather general barrier options. Some of the results are extended to variants obtained by means of…

Our goal here is to discuss the pricing problem of European and American options in discrete time using elementary calculus so as to be an easy reference for first year undergraduate students. Using the binomial model we compute the fair…

We consider the robust exponential utility maximization problem in discrete time: An investor maximizes the worst case expected exponential utility with respect to a family of nondominated probabilistic models of her endowment by…

We describe the pricing and hedging of financial options without the use of probability using rough paths. By encoding the volatility of assets in an enhancement of the price trajectory, we give a pathwise presentation of the replication of…