Related papers: Valuation of capital protection options
Funds at large portfolio management firms may consist of many portfolio managers (PMs), each managing a portion of the fund and optimizing a distinct objective. Although the PMs determine their trades independently, the trade lists may be…
We present a methodology to price options and portfolios of options on a gate-based quantum computer using amplitude estimation, an algorithm which provides a quadratic speedup compared to classical Monte Carlo methods. The options that we…
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…
The aim of this work consists in the study of the optimal investment strategy for a behavioural investor, whose preference towards risk is described by both a probability distortion and an S-shaped utility function. Within a continuous-time…
Optimal execution of a portfolio have been a challenging problem for institutional investors. Traders face the trade-off between average trading price and uncertainty, and traditional methods suffer from the curse of dimensionality. Here,…
This paper considers the optimal portfolio selection problem in a dynamic multi-period stochastic framework with regime switching. The risk preferences are of exponential (CARA) type with an absolute coefficient of risk aversion which…
The binomial tree method and the Monte Carlo (MC) method are popular methods for solving option pricing problems. However in both methods there is a trade-off between accuracy and speed of computation, both of which are important in…
Current approaches to fair valuation in insurance often follow a two-step approach, combining quadratic hedging with application of a risk measure on the residual liability, to obtain a cost-of-capital margin. In such approaches, the…
Financial portfolios are often optimized for maximum profit while subject to a constraint formulated in terms of the Conditional Value-at-Risk (CVaR). This amounts to solving a linear problem. However, in its original formulation this…
We propose a method for extending a given asset pricing formula to account for two additional sources of risk: the risk associated with future changes in market--calibrated parameters and the remaining risk associated with idiosyncratic…
In this paper we propose an efficient method to compute the price of multi-asset American options, based on Machine Learning, Monte Carlo simulations and variance reduction technique. Specifically, the options we consider are written on a…
This paper studies a portfolio optimization problem in a discrete-time Markovian model of a financial market, in which asset price dynamics depend on an external process of economic factors. There are transaction costs with a structure that…
We study a constrained stochastic control problem with jumps; the jump times of the controlled process are given by a Poisson process. The cost functional comprises quadratic components for an absolutely continuous control and the…
We consider the problem of portfolio optimization with a correlation constraint. The framework is the multiperiod stochastic financial market setting with one tradable stock, stochastic income and a non-tradable index. The correlation…
This paper investigates a continuous-time portfolio optimization problem with the following features: (i) a no-short selling constraint; (ii) a leverage constraint, that is, an upper limit for the sum of portfolio weights; and (iii) a…
This paper sets up a methodology for approximately solving optimal investment problems using duality methods combined with Monte Carlo simulations. In particular, we show how to tackle high dimensional problems in incomplete markets, where…
We study the explicit calculation of the set of superhedging portfolios of contingent claims in a discrete-time market model for d assets with proportional transaction costs. The set of superhedging portfolios can be obtained by a recursive…
Overconservatism has long been recognized as a major issue with robust optimization, despite its key advantages of tractability, performance guarantee, and limited information. To address this issue, a new criterion is proposed that can…
This paper considers the optimal dividend payment problem in piecewise-deterministic compound Poisson risk models. The objective is to maximize the expected discounted dividend payout up to the time of ruin. We provide a comparative study…
In this paper, we consider the problem of maximizing the expected discounted utility of dividend payments for an insurance company that controls risk exposure by purchasing proportional reinsurance. We assume the preference of the insurer…