Related papers: Semi-Static and Sparse Variance-Optimal Hedging

In this paper, we consider the optimal portfolio liquidation problem under the dynamic mean-variance criterion and derive time-consistent solutions in three important models. We give adapted optimal strategies under a reconsidered…

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…

In this work, I address the issue of forming riskless hedge in the continuous time option pricing model with stochastic stock volatility. I show that it is essential to verify whether the replicating portfolio is self-financing, in order…

We derive a semi-analytical pricing formula for European VIX call options under the Heston-Hawkes stochastic volatility model introduced in arXiv:2210.15343. This arbitrage-free model incorporates the volatility clustering feature by adding…

Non-equilibrium phenomena occur not only in physical world, but also in finance. In this work, stochastic relaxational dynamics (together with path integrals) is applied to option pricing theory. A recently proposed model (by Ilinski et…

In the option valuation literature, the shortcomings of one factor stochastic volatility models have traditionally been addressed by adding jumps to the stock price process. An alternate approach in the context of option pricing and…

Empirical studies indicate the existence of long range dependence in the volatility of the underlying asset. This feature can be captured by modeling its return and volatility using functions of a stationary fractional Ornstein--Uhlenbeck…

We expose a theoretical hedging optimization framework with variational preferences under convex risk measures. We explore a general dual representation for the composition between risk measures and utilities. We study the properties of the…

This paper studies a continuous-time market {under stochastic environment} where an agent, having specified an investment horizon and a target terminal mean return, seeks to minimize the variance of the return with multiple stocks and a…

In this paper we devise an extremely efficient fully dynamic distributed algorithm for maintaining sparse spanners. Our resuls also include the first fully dynamic centralized algorithm for the problem with non-trivial bounds for both…

We present a numerically efficient approach for learning a risk-neutral measure for paths of simulated spot and option prices up to a finite horizon under convex transaction costs and convex trading constraints. This approach can then be…

We provide analytical results for a static portfolio optimization problem with two coherent risk measures. The use of two risk measures is motivated by joint decision-making for portfolio selection where the risk perception of the portfolio…

We consider the problem of optimizing a portfolio of financial assets, where the number of assets can be much larger than the number of observations. The optimal portfolio weights require estimating the inverse covariance matrix of excess…

The collateral choice option allows a collateral-posting party the opportunity to change the type of security in which the collateral is deposited. Due to non-zero collateral basis spreads, this optionality significantly impacts asset…

Robust, or model-independent properties of the variance swap are well-known, and date back to Dupire and Neuberger, who showed that, given the price of co-terminal call options, the price of a variance swap was exactly specified under the…

We consider insurance derivatives depending on an external physical risk process, for example a temperature in a low dimensional climate model. We assume that this process is correlated with a tradable financial asset. We derive optimal…

We consider a stochastic volatility model where the dynamics of the volatility are given by a possibly infinite linear combination of the elements of the time extended signature of a Brownian motion. First, we show that the model is…

Changes in market conditions present challenges for investors as they cause performance to deviate from the ranges predicted by long-term averages of means and covariances. The aim of conditional asset allocation strategies is to overcome…

To improve the efficient frontier of the classical mean-variance model in continuous time, we propose a varying terminal time mean-variance model with a constraint on the mean value of the portfolio asset, which moves with the varying…

In this paper we consider a variation of the Merton's problem with added stochastic volatility and finite time horizon. It is known that the corresponding optimal control problem may be reduced to a linear parabolic boundary problem under…