Related papers: The Value of Timing Risk
People often deviate from expected utility theory when making risky and intertemporal choices. While the effects of probabilistic risk and time delay have been extensively studied in isolation, their interplay and underlying theoretical…
We study online interval scheduling in the irrevocable setting, where each interval must be immediately accepted or rejected upon arrival. The objective is to maximize the total length of accepted intervals while ensuring that no two…
We develop a robust framework for pricing and hedging of derivative securities in discrete-time financial markets. We consider markets with both dynamically and statically traded assets and make minimal measurability assumptions. We obtain…
In the paper a problem of risk measures on a discrete-time market model with transaction costs is studied. Strategy effectiveness and shortfall risk is introduced. This paper is a generalization of quantile hedging presented in [4].
In this paper, we develop mixed integer linear programming models to compute near-optimal policy parameters for the non-stationary stochastic lot sizing problem under Bookbinder and Tan's static-dynamic uncertainty strategy. Our models…
This paper examines the volatility and covariance dynamics of cash and futures contracts that underlie the Optimal Hedge Ratio (OHR) across different hedging time horizons. We examine whether hedge ratios calculated over a short term…
We develop a practical framework for identifying and quantifying the hidden layers of risks and optionality embedded in American options by introducing stochasticity into one or more of their underlying determinants. The heuristic approach…
The paper introduces and studies hedging for game (Israeli) style extension of swing options considered as multiple exercise derivatives. Assuming that the underlying security can be traded without restrictions we derive a formula for…
We consider the martingale optimal transport duality for c\`adl\`ag processes with given initial and terminal laws. Strong duality and existence of dual optimizers (robust semi-static superhedging strategies) are proved for a class of…
Hamiltonian approach in quantum mechanics provides a new thinking for barrier option pricing. For proportional floating barrier step options, the option price changing process is similar to the one dimensional trapezoid potential barrier…
This paper presents hedging strategies for European and exotic options in a Levy market. By applying Taylor's Theorem, dynamic hedging portfolios are con- structed under different market assumptions, such as the existence of power jump…
A standing assumption in the literature on proportional transaction costs is efficient friction. Together with robust no free lunch with vanishing risk, it rules out strategies of infinite variation, as they usually appear in frictionless…
Harrel's concordance index is a commonly used discrimination metric for survival models, particularly for models where the relative ordering of the risk of individuals is time-independent, such as the proportional hazards model. There are…
We consider the impact of ambiguity on the optimal timing of a class of two-dimensional integral option contracts when the exercise payoff is a positively homogeneous measurable function. Hence, the considered class of exercise payoffs…
We consider a square-integrable semimartingale and investigate the convex order relations between its discrete, continuous and predictable quadratic variation. As the main results, we show that if the semimartingale has conditionally…
This paper studies the risk-adjusted optimal timing to liquidate an option at the prevailing market price. In addition to maximizing the expected discounted return from option sale, we incorporate a path-dependent risk penalty based on…
We define the Probability of Tiered Benefit in scenarios with a binary exposure and an outcome that is either categorical with $K \geq 2$ ordered tiers or continuous partitioned by $K-1$ fixed thresholds into disjoint intervals. Similarly…
An option market maker incurs funding costs when carrying and hedging inventory. To hedge a net long delta inventory, for example, she pays a fee to borrow stock from the securities lending market. Because of haircuts, she posts additional…
We combine the one-dimensional Monte Carlo simulation and the semi-analytical one-dimensional heat potential method to design an efficient technique for pricing barrier options on assets with correlated stochastic volatility. Our approach…
We study the problem of option pricing and hedging strategies within the frame-work of risk-return arguments. An economic agent is described by a utility function that depends on profit (an expected value) and risk (a variance). In the…