Related papers: The Value of Timing Risk

This paper is a continuation of Akahori-Barsotti-Imamura (2017) and where the authors i) showed that a payment at a random time, which we call timing risk, is decomposed into an integral of static positions of knock-in type barrier options,…

American options are studied in a general discrete market in the presence of proportional transaction costs, modelled as bid-ask spreads. Pricing algorithms and constructions of hedging strategies, stopping times and martingale…

In this paper, we argue that, once the costs of maintaining the hedging portfolio are properly taken into account, semi-static portfolios should more properly be thought of as separate classes of derivatives, with non-trivial,…

In the present paper, we introduce a numerical scheme for the price of a barrier option when the price of the underlying follows a diffusion process. The numerical scheme is based on an extension of a static hedging formula of barrier…

We consider hedging of a contingent claim by a 'semi-static' strategy composed of a dynamic position in one asset and static (buy-and-hold) positions in other assets. We give general representations of the optimal strategy and the hedging…

We consider as given a discrete time financial market with a risky asset and options written on that asset and determine both the sub- and super-hedging prices of an American option in the model independent framework of ArXiv:1305.6008. We…

In this note, we consider a general discrete time financial market with proportional transaction costs as in Kabanov and Stricker (2001), Kabanov et al. (2002), Kabanov et al. (2003) and Schachermayer (2004). We provide a dual formulation…

Explicit robust hedging strategies for convex or concave payoffs under a continuous semimartingale model with uncertainty and small transaction costs are constructed. In an asymptotic sense, the upper and lower bounds of the cumulative…

It turns out that in the bivariate Black-Scholes economy Margrabe type options exhibit symmetry properties leading to semi-static hedges of rather general barrier options. Some of the results are extended to variants obtained by means of…

In this article, we introduce an algorithm called Backward Hedging, designed for hedging European and American options while considering transaction costs. The optimal strategy is determined by minimizing an appropriate loss function, which…

This article considers the pricing and hedging of a call option when liquidity matters, that is, either for a large nominal or for an illiquid underlying asset. In practice, as opposed to the classical assumptions of a price-taking agent in…

We provided an analytical representation of the price of a barrier option with one type of special moving barrier. We consider the case that risk free rate, dividend rate and stock volatility are time dependent. We get a pricing formula and…

We consider the robust pricing and hedging of American options in a continuous time setting. We assume asset prices are continuous semimartingales, but we allow for general model uncertainty specification via adapted closed convex…

We present a semi-static hedging algorithm for callable interest rate derivatives under an affine, multi-factor term-structure model. With a traditional dynamic hedge, the replication portfolio needs to be updated continuously through time…

This paper presents a data-driven interpretable machine learning algorithm for semi-static hedging of Exchange Traded options, considering transaction costs with efficient run-time. Further, we provide empirical evidence on the performance…

We propose a flexible framework for hedging a contingent claim by holding static positions in vanilla European calls, puts, bonds, and forwards. A model-free expression is derived for the optimal static hedging strategy that minimizes the…

This paper mainly discusses the American option's hedging strategies via binomialmodel and the basic idea of pricing and hedging American option. Although the essential scheme of hedging is almost the same as European option, small…

The problem of stock hedging is reconsidered in this paper, where a put option is chosen from a set of available put options to hedge the market risk of a stock. A formula is proposed to determine the probability that the potential loss…

We study the approximation of certain stochastic integrals with respect to a d-dimensional diffusion by corresponding stochastic integrals with piece-wise constant integrands. In finance this corresponds to replacing a continuously adjusted…

This paper is split in three parts: first we use labelled trade data to exhibit how market participants accept or not transactions via limit orders as a function of liquidity imbalance; then we develop a theoretical stochastic control…