Related papers: Duality formulas for robust pricing and hedging in…
In this paper, we consider scaling limits of exponential utility indifference prices for European contingent claims in the Bachelier model. We show that the scaling limit can be represented in terms of the \emph{specific relative entropy},…
Bilevel optimization problems embed the optimality of a subproblem as a constraint of another optimization problem. We introduce the concept of near-optimality robustness for bilevel optimization, protecting the upper-level solution…
In this study, we consider the asset pricing under model uncertainty with discrete time and states structure. For the single-period securities model, we give a novel definition of arbitrage under a family of probability, and explore of its…
We investigate upper and lower hedging prices of multivariate contingent claims from the viewpoint of game-theoretic probability and submodularity. By considering a game between "Market" and "Investor" in discrete time, the pricing problem…
How to price and hedge claims on nontraded assets are becoming increasingly important matters in option pricing theory today. The most common practice to deal with these issues is to use another similar or "closely related" asset or index…
In this paper we present a duality theory for the robust utility maximisation problem in continuous time for utility functions defined on the positive real axis. Our results are inspired by -- and can be seen as the robust analogues of --…
Options are contingent claims regarding the value of underlying assets. The Black-Scholes formula provides a road map for pricing these options in a risk-neutral setting, justified by a delta hedging argument in which countervailing…
Distributionally robust control is a well-studied framework for optimal decision making under uncertainty, with the objective of minimizing an expected cost function over control actions, assuming the most adverse probability distribution…
We present a reinforcement-learning (RL) framework for dynamic hedging of equity index option exposures under realistic transaction costs and position limits. We hedge a normalized option-implied equity exposure (one unit of underlying…
We give an explicit solution of robust mean-variance hedging problem in the single period model for some type of contingent claims. The alternative approach is also considered.
In this note, we study the utility maximization problem on the terminal wealth under proportional transaction costs and bounded random endowment. In particular, we restrict ourselves to the num\'eraire-based model and work with utility…
In this paper we investigate discrete time trading under integer constraints, that is, we assume that the offered goods or shares are traded in integer quantities instead of the usual real quantity assumption. For finite probability spaces…
We propose a distributionally robust formulation of the traditional risk parity portfolio optimization problem. Distributional robustness is introduced by targeting the discrete probabilities attached to each observation used during…
Distributionally robust optimization is used to tackle decision making problems under uncertainty where the distribution of the uncertain data is ambiguous. Many ambiguity sets have been proposed for continuous uncertainty that build on…
We present a robust Deep Hedging framework for the pricing and hedging of option portfolios that significantly improves training efficiency and model robustness. In particular, we propose a neural model for training model embeddings which…
The existing literature on optimal auctions focuses on optimizing the expected revenue of the seller, and is appropriate for risk-neutral sellers. In this paper, we identify good mechanisms for risk-averse sellers. As is standard in the…
An explicit formula is derived for the value of weak information in a discrete time model that works for a wide range of utility functions including the logarithmic and power utility. We assume a complete market with a finite number of…
We consider a discrete-time model of a financial market where a risky asset is bought and sold with transactions having a transient price impact. It is shown that the corresponding utility maximization problem admits a solution. We manage…
We study hedging and pricing of unattainable contingent claims in a non-Markovian regime-switching financial model. Our financial market consists of a bank account and a risky asset whose dynamics are driven by a Brownian motion and a…
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…