Related papers: Approximate hedging problem with transaction costs…
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…
We develop a mixed least squares Monte Carlo-partial differential equation (LSMC-PDE) method for pricing Bermudan style options on assets whose volatility is stochastic. The algorithm is formulated for an arbitrary number of assets and…
This paper demonstrates a practical method for computing the solution of an expectation-constrained robust maximization problem with immediate applications to model-free no-arbitrage bounds and super-replication values for many financial…
We study a maturity randomization technique for approximating optimal control problems. The algorithm is based on a sequence of control problems with random terminal horizon which converges to the original one. This is a generalization of…
This paper studies the optimal consumption under the addictive habit formation preference in markets with transaction costs and unbounded random endowments. To model the proportional transaction costs, we adopt the Kabanov's multi-asset…
This paper analyses the implementation and calibration of the Heston Stochastic Volatility Model. We first explain how characteristic functions can be used to estimate option prices. Then we consider the implementation of the Heston model,…
This papers addresses the stock option pricing problem in a continuous time market model where there are two stochastic tradable assets, and one of them is selected as a num\'eraire. It is shown that the presence of arbitrarily small…
We construct algorithms for computation of prices and superhedging strategies for game options in general discrete markets both from the seller and the buyer points of view.
A parsimonious generalization of the Heston model is proposed where the volatility-of-volatility is assumed to be stochastic. We follow the perturbation technique of Fouque et al (2011, CUP) to derive a first order approximation of the…
We determine the variance-optimal hedge when the logarithm of the underlying price follows a process with stationary independent increments in discrete or continuous time. Although the general solution to this problem is known as backward…
We study superreplication of European contingent claims in discrete time in a large trader model with market indifference prices recently proposed by Bank and Kramkov. We introduce a suitable notion of efficient friction in this framework,…
Solving inverse problems with iterative algorithms is popular, especially for large data. Due to time constraints, the number of possible iterations is usually limited, potentially affecting the achievable accuracy. Given an error one is…
The dynamic hedging theory only makes sense in the setup of one given model, whereas the practice of dynamic hedging is just the opposite, with models fleeing after the data through daily recalibration. This is quite of a quantitative…
The classical discrete time model of proportional transaction costs relies on the assumption that a feasible portfolio process has solvent increments at each step. We extend this setting in two directions, allowing for convex transaction…
We formulate a superhedging theorem in the presence of transaction costs and model uncertainty. Asset prices are assumed continuous and uncertainty is modelled in a parametric setting. Our proof relies on a new topological framework 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 present an option pricing formula for European options in a stochastic volatility model. In particular, the volatility process is defined using a fractional integral of a diffusion process and both the stock price and the volatility…
This work studies the deep learning-based numerical algorithms for optimal hedging problems in markets with general convex transaction costs on the trading rates, focusing on their scalability of trading time horizon. Based on the…
We propose a distributed solution for a constrained convex optimization problem over a network of clustered agents each consisted of a set of subagents. The communication range of the clustered agents is such that they can form a connected…
In the paper a problem of risk measures on a discrete-time market model with transaction costs is studied. Strategy effectiveness and shortfall risk is introduced. This paper is a generalization of quantile hedging presented in [4].