Related papers: On Carr and Lee's correlation immunization strateg…
The authors aim to develop numerical schemes of the two representative quadratic hedging strategies: locally risk minimizing and mean-variance hedging strategies, for models whose asset price process is given by the exponential of a normal…
This paper studies correlations among independently administered hypothetical tests of a simple interactive type, and demonstrates that correlations arising in quantum information theoretic variants of these tests can exhibit a striking…
We propose a hedging approach for general contingent claims when liquidity is a concern and trading is subject to transaction cost. Multiple assets with different liquidity levels are available for hedging. Our risk criterion targets a…
How should financial institutions hedge their balance sheets against interest rate risk when managing long-term assets and liabilities? We address this question by proposing a bond portfolio solution based on ambiguity-averse preferences,…
We consider the problem of option pricing and hedging when stock returns are correlated in time. Within a quadratic-risk minimisation scheme, we obtain a general formula, valid for weakly correlated non-Gaussian processes. We show that for…
We price and replicate a variety of claims written on the log price $X$ and quadratic variation $[X]$ of a risky asset, modeled as a positive semimartingale, subject to stochastic volatility and jumps. The pricing and hedging formulas do…
We introduce a financial market model featuring a risky asset whose price follows a sticky geometric Brownian motion and a riskless asset that grows with a constant interest rate $r\in \mathbb R $. We prove that this model satisfies No…
Portfolio optimization has long been dominated by covariance-based strategies, such as the Markowitz Mean-Variance framework. However, these approaches often fail to ensure a balanced risk structure across assets, leading to concentration…
We study the hedging and valuation of European and American claims on a non-traded asset $Y$, when a traded stock $S$ is available for hedging, with $S$ and $Y$ following correlated geometric Brownian motions. This is an incomplete market,…
We show how to price and replicate a variety of barrier-style claims written on the $\log$ price $X$ and quadratic variation $\langle X \rangle$ of a risky asset. Our framework assumes no arbitrage, frictionless markets and zero interest…
We consider a portfolio with call option and the corresponding underlying asset under the standard assumption that stock-market price represents a random variable with lognormal distribution. Minimizing the variance (hedging risk) of the…
Covariate adaptive randomization (CAR) procedures are extensively used to reduce the likelihood of covariate imbalances occurring in clinical trials. In literatures, a lot of CAR procedures have been proposed so that the specified…
This paper focuses on a dynamic multi-asset mean-variance portfolio selection problem under model uncertainty. We develop a continuous time framework for taking into account ambiguity aversion about both expected return rates and…
The serial correlations of illiquid stock's price changes are studied, allowing for unconditional heteroscedasticity and time-varying zero returns probability. Depending on the set up, we investigate how the usual autocorrelations can be…
In this work we are concerned with valuing optionalities associated to invest or to delay investment in a project when the available information provided to the manager comes from simulated data of cash flows under historical (or…
We provided proof here that coefficient of variation (CV) is a direct measure of risk using an equation that has been derived here for the first time. We also presented a method to generate a stock CV based on return that strongly…
This study presents a deep reinforcement learning approach for global hedging of long-term financial derivatives. A similar setup as in Coleman et al. (2007) is considered with the risk management of lookback options embedded in guarantees…
This paper presents a novel framework for analyzing the optimal asset and signal combination problem. Our approach builds upon the dynamic portfolio selection problem introduced by Brandt and Santa-Clara (2006) and consists of two stages.…
A new methodology has been introduced to clean the correlation matrix of single stocks returns based on a constrained principal component analysis using financial data. Portfolios were introduced, namely "Fundamental Maximum Variance…
We study hedging and pricing of unattainable contingent claims in a non-Markovian regime-switching financial model. Our financial market consists of a bank account and a risky asset whose dynamics are driven by a Brownian motion and a…