Related papers: Almost-sure hedging with permanent price impact

Continuous time financial market models are often motivated as scaling limits of discrete time models. The objective of this paper is to establish such a connection for a robust framework. More specifically, we consider discrete time models…

Since Hobson's seminal paper [D. Hobson: Robust hedging of the lookback option. In: Finance Stoch. (1998)] the connection between model-independent pricing and the Skorokhod embedding problem has been a driving force in robust finance. We…

American options are financial instruments that can be exercised at any time before expiration. In this paper we study the problem of pricing this kind of derivatives within a framework in which some of the properties --volatility and…

We investigate the problem of pricing and hedging derivatives of Electricity Futures contract when the underlying asset is not available. We propose to use a cross hedging strategy based on the Futures contract covering the larger delivery…

We study T. Cover's rebalancing option (Ordentlich and Cover 1998) under discrete hindsight optimization in continuous time. The payoff in question is equal to the final wealth that would have accrued to a $\$1$ deposit into the best of…

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 present a semi-static hedging algorithm for callable interest rate derivatives under an affine, multi-factor term-structure model. With a traditional dynamic hedge, the replication portfolio needs to be updated continuously through time…

We study a class of semi-discrete variational problems that arise in economic matching and game theory, where agents with continuous attributes are matched to a finite set of outcomes with a one dimensional structure. Such problems appear…

We consider model-free pricing of digital options, which pay out if the underlying asset has crossed both upper and lower barriers. We make only weak assumptions about the underlying process (typically continuity), but assume that the…

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 study pricing and (super)hedging for American options in an imperfect market model with default, where the imperfections are taken into account via the nonlinearity of the wealth dynamics. The payoff is given by an RCLL adapted process…

In an incomplete market driven by time-changed L\'evy noises we consider the problem of hedging a financial position coupled with the underlying risk of model uncertainty. Then we study hedging under worst-case-scenario. The proposed…

We introduce a class of randomly time-changed fast mean-reverting stochastic volatility models and, using spectral theory and singular perturbation techniques, we derive an approximation for the prices of European options in this setting.…

We consider a multivariate financial market with transaction costs and study the problem of finding the minimal initial capital needed to hedge, without risk, European-type contingent claims. The model is similar to the one considered in…

We present an actor-critic-type reinforcement learning algorithm for solving the problem of hedging a portfolio of financial instruments such as securities and over-the-counter derivatives using purely historic data. The key characteristics…

This paper is concerned with the convergence rate of policy iteration for (deterministic) optimal control problems in continuous time. To overcome the problem of ill-posedness due to lack of regularity, we consider a semi-discrete scheme by…

We propose a continuous-time model of trading with heterogeneous beliefs. Risk-neutral agents face quadratic costs-of-carry on positions and thus their marginal valuations decrease with the size of their position, as it would be the case…

Using spectral decomposition techniques and singular perturbation theory, we develop a systematic method to approximate the prices of a variety of options in a fast mean-reverting stochastic volatility setting. Four examples are provided in…

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…

We provide a Fundamental Theorem of Asset Pricing and a Superhedging Theorem for a model independent discrete time financial market with proportional transaction costs. We consider a probability-free version of the Robust No Arbitrage…