Related papers: Hedging, arbitrage and optimality with superlinear…
In this article we consider an optimization problem of expected utility maximization of continuous-time trading in a financial market. This trading is constrained by a benchmark for a utility-based shortfall risk measure. The market…
This article examines arbitrage investment in a mispriced asset when the mispricing follows the Ornstein-Uhlenbeck process and a credit-constrained investor maximizes a generalization of the Kelly criterion. The optimal differentiable and…
We construct an utility-based dynamic asset pricing model for a limit order market. The price is nonlinear in volume and subject to market impact. We solve an optimal hedging problem under the market impact and derive the dynamics of the…
Deep hedging is a deep-learning-based framework for derivative hedging in incomplete markets. The advantage of deep hedging lies in its ability to handle various realistic market conditions, such as market frictions, which are challenging…
The choice of admissible trading strategies in mathematical modelling of financial markets is a delicate issue, going back to Harrison and Kreps (1979). In the context of optimal portfolio selection with expected utility preferences this…
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,…
This paper studies four trading algorithms of a professional trader at a multilateral trading facility, observing a realistic two-sided limit order book whose dynamics are driven by the order book events. The identity of the trader can be…
We expose a theoretical hedging optimization framework with variational preferences under convex risk measures. We explore a general dual representation for the composition between risk measures and utilities. We study the properties of the…
We deal with the optimal execution problem when the broker's goal is to reach a performance barrier avoiding a downside barrier. The performance is provided by the wealth accumulated by trading in the market, the shares detained by the…
We explore a nuance to 'no arbitrage' in relation to 'information efficiency': acting immediately on an arbitrage is sometimes suboptimal; in such cases optimised trading can suppress the anticipation of predictable risk-outcomes, thereby…
We investigate the well-posedness in the Hadamard sense and the absence of price manipulation in the optimal execution problem within the Almgren-Chriss framework, where the temporary and permanent impact parameters vary deterministically…
The paper develops general, discrete, non-probabilistic market models and minmax price bounds leading to price intervals for European options. The approach provides the trajectory based analogue of martingale-like properties as well as a…
We consider the problem of maximizing expected utility from terminal wealth in models with stochastic factors. Using martingale methods and a conditioning argument, we determine the optimal strategy for power utility under the assumption…
The duality between the robust (or equivalently, model independent) hedging of path dependent European options and a martingale optimal transport problem is proved. The financial market is modeled through a risky asset whose price is only…
To any utility maximization problem under transaction costs one can assign a frictionless model with a price process $S^*$, lying in the bid/ask price interval $[\underline S, \bar{S}]$. Such process $S^*$ is called a \emph{shadow price} if…
Quadratic hedging of option payoffs generates the variance optimal martingale measure. When an option features an exercise policy and its cash flows are hedged according to this approach, it may be tempting to optimize such a policy under…
We investigate duality and existence of dual optimizers for several adapted optimal transport problems under minimal assumptions. This includes the causal and bicausal transport, the causal and bicausal barycenter problem, and a…
This paper investigates the optimal hedging strategies of an informed broker interacting with multiple traders in a financial market. We develop a theoretical framework in which the broker, possessing exclusive information about the drift…
We consider a financial model with permanent price impact. Continuous time trading dynamics are derived as the limit of discrete rebalancing policies. We then study the problem of super-hedging a European option. Our main result is the…
We propose a framework to study optimal trading policies in a one-tick pro-rata limit order book, as typically arises in short-term interest rate futures contracts. The high-frequency trader has the choice to trade via market orders or…