Related papers: Refraction-reflection strategies in the dual model
Dynamic hedging is the practice of periodically transacting financial instruments to offset the risk caused by an investment or a liability. Dynamic hedging optimization can be framed as a sequential decision problem; thus, Reinforcement…
In this paper we investigate an optimal dividend problem with transaction costs, where the surplus process is modelled by a refracted L\'evy process and the ruin time is considered with Parisian delay. Presence of the transaction costs…
Debt recycling is an aggressive equity extraction strategy that potentially permits faster repayment of a mortgage. While equity progressively builds up as the mortgage is repaid monthly, mortgage holders may obtain another loan they could…
This paper investigates the optimal retirement decision, investment, and consumption strategies in a market with jump diffusion, taking into account habit persistence and stock-wage correlation. Our analysis considers multiple stocks and a…
Recently, it has become evident that submodularity naturally captures widely occurring concepts in machine learning, signal processing and computer vision. Consequently, there is need for efficient optimization procedures for submodular…
In this paper, we study an optimal dividend and capital-injection problem in a Cram\'er--Lundberg model where claim arrivals follow a Hawkes process, capturing clustering effects often observed in insurance portfolios. We establish key…
This paper examines replication portfolio construction in incomplete markets - a key problem in financial engineering with applications in pricing, hedging, balance sheet management, and energy storage planning. We model this as a…
We study a model of a corporation which has the possibility to choose various production/business policies with different expected profits and risks. In the model there are restrictions on the dividend distribution rates as well as…
This paper considers an optimal dividend distribution problem for an insurance company where the dividends are paid in a foreign currency. In the absence of dividend payments, our risk process follows a spectrally negative L\'evy process.…
Reinforcement learning (RL) struggles to scale to large, combinatorial action spaces common in many real-world problems. This paper introduces a novel framework for training discrete diffusion models as highly effective policies in these…
We study a time-inconsistent singular stochastic control problem for a general one-dimensional diffusion, where time-inconsistency arises from a non-exponential discount function. To address this, we adopt a game-theoretic framework and…
In the present paper, the primal-dual problem consisting of the investment risk minimization problem and the expected return maximization problem in the mean-variance model is discussed using replica analysis. As a natural extension of the…
We construct semi-infinite billiard domains which reverse the direction of most incoming particles. We prove that almost all particles will leave the open billiard domain after a finite number of reflections. Moreover, with high probability…
Suppose an investor aims at Delta hedging a European contingent claim $h(S(T))$ in a jump-diffusion model, but incorrectly specifies the stock price's volatility and jump sensitivity, so that any hedging strategy is calculated under a…
We consider a discrete-time dividend payout problem with risk sensitive shareholders. It is assumed that they are equipped with a risk aversion coefficient and construct their discounted payoff with the help of the exponential premium…
This paper studies convex duality in optimal investment and contingent claim valuation in markets where traded assets may be subject to nonlinear trading costs and portfolio constraints. Under fairly general conditions, the dual expressions…
Inspired by the double-debt problem in Japan where the mortgagor has to pay the remaining loan even if their house was destroyed by a catastrophic event, we model the lender's cash flow, by an exponential functional of a renewal-reward…
We propose and study a simple model of dynamical redistribution of capital in a diversified portfolio. We consider a hypothetical situation of a portfolio composed of N uncorrelated stocks. Each stock price follows a multiplicative random…
This paper concerns an optimal dividend distribution problem for an insurance company with surplus-dependent premium. In the absence of dividend payments, such a risk process is a particular case of so-called piecewise deterministic Markov…
In this paper, we present a simple microeconomic model with linear continuous-time dynamics that describes a production-inventory system with debt repayment. This model is formulated in terms of optimal control and its exact solutions are…