Related papers: Dual control Monte Carlo method for tight bounds o…
Traders are often faced with large block orders in markets with limited liquidity and varying volatility. Executing the entire order at once usually incurs a large trading cost because of this limited liquidity. In order to minimize this…
In this paper, we are concerned with the classical solvability of a class of second-order Hamilton-Jacobi-Bellman equations (HJB equations) arising from stochastic optimal control problems with linear dynamics and uniformly convex cost…
We present Monte Carlo-Euler methods for a weak approximation problem related to the Heath-Jarrow-Morton (HJM) term structure model, based on \Ito stochastic differential equations in infinite dimensional spaces, and prove strong and weak…
Path Integral Control methods were developed for stochastic optimal control covering a wide class of finite horizon formulations with control affine nonlinear dynamics. Characteristic for this class is that the HJB equation is linear and…
Least squares Monte Carlo methods are a popular numerical approximation method for solving stochastic control problems. Based on dynamic programming, their key feature is the approximation of the conditional expectation of future rewards by…
We study a hybrid tree-finite difference method which permits to obtain efficient and accurate European and American option prices in the Heston Hull-White and Heston Hull-White2d models. Moreover, as a by-product, we provide a new…
The hybrid Monte Carlo (HMC) algorithm is applied for the Bayesian inference of the stochastic volatility (SV) model. We use the HMC algorithm for the Markov chain Monte Carlo updates of volatility variables of the SV model. First we…
We develop a Monte-Carlo based numerical method for solving discrete-time stochastic optimal control problems with inventory. These are optimal control problems in which the control affects only a deterministically evolving inventory…
In this paper, we study the optimal singular controls for stochastic recursive systems, in which the control has two components: the regular control, and the singular control. Under certain assumptions, we establish the dynamic programming…
Motivated by empirical evidence for rough volatility models, this paper investigates continuous-time mean-variance (MV) portfolio selection under the Volterra Heston model. Due to the non-Markovian and non-semimartingale nature of the…
This paper develops algorithms for high-dimensional stochastic control problems based on deep learning and dynamic programming. Unlike classical approximate dynamic programming approaches, we first approximate the optimal policy by means of…
The Heston stochastic volatility model is arguably, the most popular stochastic volatility model used to price and risk manage exotic derivatives. In spite of this, it is not necessarily easy to calibrate to the market and obtain stable…
We consider the portfolio optimisation problem where the terminal function is an S-shaped utility applied at the difference between the wealth and a random benchmark process. We develop several numerical methods for solving the problem…
The problem of robust utility maximization in an incomplete market with volatility uncertainty is considered, in the sense that the volatility of the market is only assumed to lie between two given bounds. The set of all possible models…
Consider a process, stochastic or deterministic, obtained by using a numerical integration scheme, or from Monte-Carlo methods involving an approximation to an integral, or a Newton-Raphson iteration to approximate the root of an equation.…
Hamiltonian Monte Carlo (HMC) is a widely deployed method to sample from high-dimensional distributions in Statistics and Machine learning. HMC is known to run very efficiently in practice and its popular second-order "leapfrog"…
The present paper provides a study of high-dimensional statistical arbitrage that combines factor models with the tools from stochastic control, obtaining closed-form optimal strategies which are both interpretable and computationally…
We provide an efficient and accurate simulation scheme for the rough Heston model in the standard ($H>0$) as well as the hyper-rough regime ($H > -1/2$). The scheme is based on low-dimensional Markovian approximations of the rough Heston…
This paper considers the single factor Heath-Jarrow-Morton model for the interest rate curve with stochastic volatility. Its natural formulation, described in terms of stochastic differential equations, is solved through Monte Carlo…
We discuss a class of debt management problems in a stochastic environment model. We propose a model for the debt-to-GDP (Gross Domestic Product) ratio where the government interventions via fiscal policies affect the public debt and the…