Related papers: Valuation of capital protection options
Mean-variance portfolio optimization problems often involve separable nonconvex terms, including penalties on capital gains, integer share constraints, and minimum position and trade sizes. We propose a heuristic algorithm for such problems…
This paper develops a new dual approach to compute the hedging portfolio of a Bermudan option and its initial value. It gives a "purely dual" algorithm following the spirit of Rogers (2010) in the sense that it only relies on the dual…
For $n$ assets and discrete-time rebalancing, the probability to complete a given schedule of investments and withdrawals is maximized over progressively measurable portfolio weight functions. Applications consider two assets, namely the…
In general, the pricing of variable annuities with guarantees can be done by solving the corresponding optimal stochastic control problem if the contract withdrawal strategy is assumed to be optimal. This is typically solved as a dynamic…
In this paper we take a look at a simple portfolio insurance strategy using a protective put and computationally derive the investor's governing utility structures underlying such a strategy under alternative market scenarios. Investor…
A standard objective in partially-observable Markov decision processes (POMDPs) is to find a policy that maximizes the expected discounted-sum payoff. However, such policies may still permit unlikely but highly undesirable outcomes, which…
In this paper, we investigate an optimal investment problem associated with proportional portfolio insurance (PPI) strategies in the presence of jumps in the underlying dynamics. PPI strategies enable investors to mitigate downside risk…
In a context of illiquidity, the reservation price is a well-accepted alternative to the usual martingale approach which does not apply. However, this price is not available in closed form and requires numerical methods such as Monte Carlo…
Based on a point of view that solvency and security are first, this paper considers regular-singular stochastic optimal control problem of a large insurance company facing positive transaction cost asked by reinsurer under solvency…
This paper covers a massive acceleration of Monte-Carlo based pricing method for financial products and financial derivatives. The method is applicable in risk management settings, where a financial product has to be priced under a number…
In spite of the growing consideration for optimal execution in the financial mathematics literature, numerical approximations of optimal trading curves are almost never discussed. In this article, we present a numerical method to…
We pose the decumulation strategy for a Defined Contribution (DC) pension plan as a problem in optimal stochastic control. The controls are the withdrawal amounts and the asset allocation strategy. We impose maximum and minimum constraints…
We propose a method for pricing American options whose pay-off depends on the moving average of the underlying asset price. The method uses a finite dimensional approximation of the infinite-dimensional dynamics of the moving average…
We consider the multi-period portfolio optimization problem with a single asset that can be held long or short. Due to the presence of transaction costs, maximizing the immediate reward at each period may prove detrimental, as frequent…
In this paper, we study a pricing problem of the multiple reset put option, which allows the holder to reset several times a current strike price to obtain an at-the-money European put option. We formulate the pricing problem as a multiple…
The state-of-the-art proposes Life Care Annuities, that have been recently designed as variable annuity contracts with Long-Term Care payouts and Guaranteed Lifelong Withdrawal Benefits. In this paper, we propose more general features for…
A critical problem in the financial world deals with the management of risk, from regulatory risk to portfolio risk. Many such problems involve the analysis of securities modelled by complex dynamics that cannot be captured analytically,…
Importance sampling is a promising variance reduction technique for Monte Carlo simulation based derivative pricing. Existing importance sampling methods are based on a parametric choice of the proposal. This article proposes an algorithm…
In this paper, we focus on the problem of optimal portfolio-consumption policies in a multi-asset financial market, where the n risky assets follow Exponential Ornstein-Uhlenbeck processes, along with one risk-free bond. The investor's…
We propose a novel Bayesian optimisation procedure for outlier detection in the Capital Asset Pricing Model. We use a parametric product partition model to robustly estimate the systematic risk of an asset. We assume that the returns follow…