Related papers: Robust Pricing and Hedging around the Globe
We study a continuous-time financial market with continuous price processes under model uncertainty, modeled via a family $\mathcal{P}$ of possible physical measures. A robust notion ${\rm NA}_{1}(\mathcal{P})$ of no-arbitrage of the first…
Distributionally robust optimization has been shown to offer a principled way to regularize learning models. In this paper, we find that Tikhonov regularization is distributionally robust in an optimal transport sense (i.e., if an adversary…
In recent years, two prominent paradigms have shaped distributionally robust optimization (DRO), modeling distributional ambiguity through $\phi$-divergences and Wasserstein distances, respectively. While the former focuses on ambiguity in…
In this paper we study a robust utility maximization problem in continuous time under model uncertainty. The model uncertainty is governed by a continuous semimartingale with uncertain local characteristics. Here, the differential…
A method for pricing and superhedging European options under proportional transaction costs based on linear vector optimisation and geometric duality developed by Lohne & Rudloff (2014) is compared to a special case of the algorithms for…
In this paper, we combine modern portfolio theory and option pricing theory so that a trader who takes a position in a European option contract and the underlying assets can construct an optimal portfolio such that at the moment of the…
We study the structural properties of multi-period martingale optimal transport (MOT). We develop new tools to address these problems, and use them to prove several uniqueness and structural results on three-period martingale optimal…
We construct an aggregator for a family of Snell envelopes in a nondominated framework. We apply this construction to establish a robust hedging duality, along with the existence of a minimal hedging strategy, in a general semi-martingale…
We formulate a dynamic reinsurance problem in which the insurer seeks to control the terminal distribution of its surplus while minimizing the L2-norm of the ceded risk. Using techniques from martingale optimal transport, we show that,…
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…
We consider model-free pricing of digital options, which pay out if the underlying asset has crossed both upper and lower barriers. We make only weak assumptions about the underlying process (typically continuity), but assume that the…
This paper is devoted to a study of robust fundamental theorems of asset pricing in discrete time and finite horizon settings. Uncertainty is modelled by a (possibly uncountable) family of price processes on the same probability space. Our…
We introduce and investigate properties of a variant of the semi-discrete optimal transport problem. In this problem, one is given an absolutely continuous source measure and cost function, along with a finite set which will be the support…
We consider an extension of the Monge-Kantorovitch optimal transportation problem. The mass is transported along a continuous semimartingale, and the cost of transportation depends on the drift and the diffusion coefficients of the…
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…
In this paper we extend discrete time semi-static trading strategies by also allowing for dynamic trading in a finite amount of options, and we study the consequences for the model-independent super-replication prices of exotic derivatives.…
This paper addresses the question of how to invest in a robust growth-optimal way in a market where the instantaneous expected return of the underlying process is unknown. The optimal investment strategy is identified using a generalized…
We study indifference pricing of exotic derivatives by using hedging strategies that take static positions in quoted derivatives but trade the underlying and cash dynamically over time. We use real quotes that come with bid-ask spreads and…
We study a two-period moral hazard problem; there are two agents, with action sets that are unknown to the principal. The principal contracts with each agent sequentially, and seeks to maximize the worst-case discounted sum of payoffs,…
This paper studies a variant of ramified/branched optimal transportation problems. Given the distributions of production capacities and market sizes, a firm looks for an allocation of productions over factories, a distribution of sales…