Related papers: Building arbitrage-free implied volatility: Sinkho…
We propose a constructive framework for the super-hedging problem of a European contingent claim under proportional transaction costs in discrete time. Our main contribution is an explicit recursive scheme that computes both the…
We present a method for the arbitrage-free interpolation of plain-vanilla option prices and implied volatilities, which is based on a system of integral equations that relates terminal density and option prices. Using a discretization of…
This paper presents a stochastic model for discrete-time trading in financial markets where trading costs are given by convex cost functions and portfolios are constrained by convex sets. The model does not assume the existence of a cash…
We treat implied volatility surface (IVS) reconstruction as a learning problem guided by two principles. First, we adopt a meta-learning view that trains across trading days to learn a procedure that maps sparse option quotes to a full IVS…
This paper presents a computation-efficient stochastic dynamic programming algorithm for solving energy storage price arbitrage considering variable charge and discharge efficiencies. We formulate the price arbitrage problem using…
In the context of Risk Neutral Pricing theory, we consider the classic problem of calibrating a martingale over $\mathbb{R}^n$ to a finite number of marginals thereof, or more practically, to prices of an arbitrary finite set of (joint)…
The notion of Inertial Balanced Viscosity (IBV) solution to rate-independent evolutionary processes is introduced. Such solutions are characterized by an energy balance where a suitable, rate-dependent, dissipation cost is optimized at jump…
Entropic optimal transport (OT) and the Sinkhorn algorithm have made it practical for machine learning practitioners to perform the fundamental task of calculating transport distance between statistical distributions. In this work, we focus…
In this paper we consider a method of solving optimal stopping problems in discrete and continuous time based on their dual representation. A novel and generic simulation-based optimization algorithm not involving nested simulations is…
In this paper we study short-time behavior of the at-the-money implied volatility for Inverse European options with fixed strike price. The asset price is assumed to follow a general stochastic volatility process. Using techniques of the…
We extend variational quantum optimization algorithms for Quadratic Unconstrained Binary Optimization problems to the class of Mixed Binary Optimization problems. This allows us to combine binary decision variables with continuous decision…
A volatility surface is an important tool for pricing and hedging derivatives. The surface shows the volatility that is implied by the market price of an option on an asset as a function of the option's strike price and maturity. Often,…
In this paper, we present a method for constructing a (static) portfolio of co-maturing European options whose price sign is determined by the skewness level of the associated implied volatility. This property holds regardless of the…
The purpose of this work is to develop a framework to calibrate signed datasets so as to be consistent with specified marginals by suitably extending the Schr\"odinger-Fortet-Sinkhorn paradigm. Specifically, we seek to revise…
We present an algorithm producing a dynamic non-self-financing hedging strategy in an incomplete market corresponding to investor-relevant risk criterion. The optimization is a two stage process that first determines admissible model…
We propose a flexible framework for hedging a contingent claim by holding static positions in vanilla European calls, puts, bonds, and forwards. A model-free expression is derived for the optimal static hedging strategy that minimizes the…
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…
We derive iterative scaling algorithms of the Sinkhorn-Knopp (SK) type for constrained optimal transport. The constraints are in the form of prior-imposed zeroes in the transport plan. Based on classical Bregman arguments, we prove…
The paper studies the concepts of hedging and arbitrage in a non probabilistic framework. It provides conditions for non probabilistic arbitrage based on the topological structure of the trajectory space and makes connections with the usual…
We derive a forward equation for arbitrage-free barrier option prices, in terms of Markovian projections of the stochastic volatility process, in continuous semi-martingale models. This provides a Dupire-type formula for the coefficient…