Related papers: Cash Accumulation Strategy based on Optimal Replic…
The Coupon Collector Problem (CCP) is a well-known combinatorial problem that seeks to estimate the number of random draws required to complete a collection of $n$ distinct coupon types. Various generalizations of this problem have been…
In this paper we will develop a methodology for obtaining pricing expressions for financial instruments whose underlying asset can be described through a simple continuous-time random walk (CTRW) market model. Our approach is very natural…
This paper covers a massive acceleration of Monte-Carlo based pricing method for financial products and financial derivatives. The method is applicable in risk management settings, where a financial product has to be priced under a number…
We investigate the general problem of how to model the kinematics of stock prices without considering the dynamical causes of motion. We propose a stochastic process with long-range correlated absolute returns. We find that the model is…
The determination of acceptability prices of contingent claims requires the choice of a stochastic model for the underlying asset price dynamics. Given this model, optimal bid and ask prices can be found by stochastic optimization. However,…
In the current insurance literature, prediction of insurance claims in the regression problem is often performed with a statistical model. This model-based approach may potentially suffer from several drawbacks: (i) model misspecification,…
A fundamental economic question is that of designing revenue-maximizing mechanisms in dynamic environments. This paper considers a simple yet compelling market model to tackle this question, where forward-looking buyers arrive at the market…
We consider a standard optimal investment problem in a complete financial market driven by a Wiener process and derive an explicit formula for the optimal portfolio process in terms of the vertical derivative from functional It^o calculus.…
Organizations use cash management models to control balances to both avoid overdrafts and obtain a profit from short-term investments. Most management models are based on control bounds which are derived from the assumption of a particular…
Continuous time models in the theory of real options give explicit formulas for optimal exercise strategies when options are simple and the price of an underlying asset follows a geometric Brownian motion. This paper suggests a general,…
Selling a single item to $n$ self-interested buyers is a fundamental problem in economics, where the two objectives typically considered are welfare maximization and revenue maximization. Since the optimal mechanisms are often impractical…
Nested simulation is a natural approach to tackle nested estimation problems in operations research and financial engineering. The outer-level simulation generates outer scenarios and the inner-level simulations are run in each outer…
We determine the variance-optimal hedge when the logarithm of the underlying price follows a process with stationary independent increments in discrete or continuous time. Although the general solution to this problem is known as backward…
The problem of approximating/tracking the value of a Wiener process is considered. The discretization points are placed at times when the value of the process differs from the approximation by some amount, here denoted by eta. It is found…
We propose and study a simple model of dynamical redistribution of capital in a diversified portfolio. We consider a hypothetical situation of a portfolio composed of N uncorrelated stocks. Each stock price follows a multiplicative random…
We consider a trader who wants to direct his portfolio towards a set of acceptable wealths given by a convex risk measure. We propose a black-box algorithm, whose inputs are the joint law of stock prices and the convex risk measure, and…
We consider a class of generalized capital asset pricing models in continuous time with a finite number of agents and tradable securities. The securities may not be sufficient to span all sources of uncertainty. If the agents have…
We mathematically analyze a simple market model where trading at each point in time involves only two agents with the sum of their money being conserved and with neither parties resulting with negative money after the interaction process.…
One of the problems faced by a firm that sells certain commodities is to determine the number of products that it must supply in order to maximize its profit. In this article, the authors give an answer to this problem of economic interest.…
Quantization techniques have been applied in many challenging finance applications, including pricing claims with path dependence and early exercise features, stochastic optimal control, filtering problems and efficient calibration of large…