Related papers: Risk Arbitrage and Hedging to Acceptability under …

We theoretically and empirically study portfolio optimization under transaction costs and establish a link between turnover penalization and covariance shrinkage with the penalization governed by transaction costs. We show how the ex ante…

We prove a version of the fundamental theorem of asset pricing (FTAP) in continuous time that is based on the strict no-arbitrage condition and that is applicable to both frictionless markets and markets with proportional transaction costs.…

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…

In this article we propose a study of market models starting from a set of axioms, as one does in the case of risk measures. We define a market model simply as a mapping from the set of adapted strategies to the set of random variables…

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…

Since risky positions in multivariate portfolios can be offset by various choices of capital requirements that depend on the exchange rules and related transaction costs, it is natural to assume that the risk measures of random vectors are…

We consider indifference pricing of contingent claims consisting of payment flows in a discrete time model with proportional transaction costs and under exponential disutility. This setting covers utility maximisation as a special case. A…

We consider the hedging error of a derivative due to discrete trading in the presence of a drift in the dynamics of the underlying asset. We suppose that the trader wishes to find rebalancing times for the hedging portfolio which enable him…

We consider statistical estimation of superhedging prices using historical stock returns in a frictionless market with d traded assets. We introduce a plugin estimator based on empirical measures and show it is consistent but lacks suitable…

Recent progress in portfolio choice has made a wide class of problems involving transaction costs tractable. We review the basic approach to these problems, and outline some directions for future research.

We generalize classical results on the existence of optimal portfolios in discrete time frictionless market models to models with capital gains taxes. We consider the realistic but mathematically challenging rule that losses do not trigger…

Model-based process simulation can be used to derive designs and operating conditions of chemical processes that optimally balance multiple objectives, such as quality, costs, or environmental impacts. This work focuses on identifying…

We develop a behavioral asset pricing model in which agents trade in a market with information friction. Profit-maximizing agents switch between trading strategies in response to dynamic market conditions. Due to noisy private information…

A discrete time probabilistic model, for optimal equity allocation and portfolio selection, is formulated so as to apply to (at least) reinsurance. In the context of a company with several portfolios (or subsidiaries), representing both…

This paper studies the utility maximization on the terminal wealth with random endowments and proportional transaction costs. To deal with unbounded random payoffs from some illiquid claims, we propose to work with the acceptable portfolios…

We study how transaction cost affects to the equilibrium return and optimal stock holdings in equilibrium. To this end, we develop a continuous-time risk-sharing model where heterogenous agents trade toward terminal target holdings subject…

We study the problem of super-replication for game options under proportional transaction costs. We consider a multidimensional continuous time model, in which the discounted stock price process satisfies the conditional full support…

We consider the problem of option pricing and hedging when stock returns are correlated in time. Within a quadratic-risk minimisation scheme, we obtain a general formula, valid for weakly correlated non-Gaussian processes. We show that for…

Contrary to the claims made by several authors, a financial market model in which the price of a risky security follows a reflected geometric Brownian motion is not arbitrage-free. In fact, such models violate even the weakest no-arbitrage…

We consider a market consisting of one safe and one risky asset, which offer constant investment opportunities. Taking into account both proportional transaction costs and linear price impact, we derive optimal rebalancing policies for…