Related papers: Options on CPPI with guaranteed minimum equity exp…
Multi-period portfolio optimization is important for real portfolio management, as it accounts for transaction costs, path-dependent risks, and the intertemporal structure of trading decisions that single-period models cannot capture.…
The vast majority of works on option pricing operate on the assumption of risk neutral valuation, and consequently focus on the expected value of option returns, and do not consider risk parameters, such as variance. We show that it is…
We introduce a new numerical approximation method for functionals of factor credit portfolio models based on the theory of mod-$\phi$ convergence and mod-$\phi$ approximation schemes. The method can be understood as providing correction…
Although risk awareness is fundamental to an online operating agent, it has received less attention in the challenging continuous domain and under partial observability. This paper presents a novel formulation and solution for risk-averse…
We consider evaluation methods for payoffs with an inherent financial risk as encountered for instance for portfolios held by pension funds and insurance companies. Pricing such payoffs in a way consistent to market prices typically…
The most recent update of financial option models is American options under stochastic volatility models with jumps in returns (SVJ) and stochastic volatility models with jumps in returns and volatility (SVCJ). To evaluate these options,…
Multi-task reinforcement learning aims to quickly identify solutions for new tasks with minimal or no additional interaction with the environment. Generalized Policy Improvement (GPI) addresses this by combining a set of base policies to…
Security properties are often focused on the technological side of the system. One implicitly assumes that the users will behave in the right way to preserve the property at hand. In real life, this cannot be taken for granted. In…
We present a quantum algorithm for European option pricing in finance, where the key idea is to work in the unary representation of the asset value. The algorithm needs novel circuitry and is divided in three parts: first, the amplitude…
Ensuring safe physical interaction between torque-controlled manipulators and humans is essential for deploying robots in everyday environments. Model Predictive Control (MPC) has emerged as a suitable framework thanks to its capacity to…
In financial markets marked by inherent volatility, extreme events can result in substantial investor losses. This paper proposes a portfolio strategy designed to mitigate extremal risks. By applying extreme value theory, we evaluate the…
Portfolio optimisation is essential in quantitative investing, but its implementation faces several practical difficulties. One particular challenge is converting optimal portfolio weights into real-life trades in the presence of realistic…
We study the portfolio problem of maximizing the outperformance probability over a random benchmark through dynamic trading with a fixed initial capital. Under a general incomplete market framework, this stochastic control problem can be…
Model predictive path integral (MPPI) is a sampling-based method for solving complex model predictive control (MPC) problems, but its real-time implementation faces two key challenges: the computational cost and sample requirements grow…
Using daily returns of the S&P 500 stocks from 2001 to 2011, we perform a backtesting study of the portfolio optimization strategy based on the extreme risk index (ERI). This method uses multivariate extreme value theory to minimize the…
We study pricing and (super)hedging for American options in an imperfect market model with default, where the imperfections are taken into account via the nonlinearity of the wealth dynamics. The payoff is given by an RCLL adapted process…
The two main issues for managing wrong way risk (WWR) for the credit valuation adjustment (CVA, i.e. WW-CVA) are calibration and hedging. Hence we start from a novel model-free worst-case approach based on static hedging of counterparty…
In this paper, we explore the pricing and hedging strategies for an innovative insurance product called the equity protection swap(EPS). Notably, we focus on the application of EPSs involving cross-currency reference portfolios, reflecting…
The downside risk of a portfolio of (equity)assets is generally substantially higher than the downside risk of its components. In particular in times of crises when assets tend to have high correlation, the understanding of this difference…
We present an approach to market-consistent multi-period valuation of insurance liability cash flows based on a two-stage valuation procedure. First, a portfolio of traded financial instrument aimed at replicating the liability cash flow is…