Related papers: Options on CPPI with guaranteed minimum equity exp…
Duality for robust hedging with proportional transaction costs of path dependent European options is obtained in a discrete time financial market with one risky asset. Investor's portfolio consists of a dynamically traded stock and a static…
We use a continuous version of the standard deviation premium principle for pricing in incomplete equity markets by assuming that the investor issuing an unhedgeable derivative security requires compensation for this risk in the form of a…
Embedding value investment in portfolio optimization models has always been a challenge. In this paper, we attempt to incorporate it by employing principal component analysis to filter out dominant financial ratios from each sector and…
In this work we want to provide a general principle to evaluate the CVA (Credit Value Adjustment) for a vulnerable option, that is an option subject to some default event, concerning the solvability of the issuer. CVA is needed to evaluate…
Sampling-based controllers, such as Model Predictive Path Integral (MPPI) methods, offer substantial flexibility but often suffer from high variance and low sample efficiency. To address these challenges, we introduce a hybrid…
For safety, autonomous systems must be able to consider sudden changes and enact contingency plans appropriately. State-of-the-art methods currently find trajectories that balance between nominal and contingency behavior, or plan for a…
In this paper, we study large losses arising from defaults of a credit portfolio. We assume that the portfolio dependence structure is modelled by the Archimedean copula family as opposed to the widely used Gaussian copula. The resulting…
In this paper new analytical and numerical approaches to valuating path-dependent options of European type have been developed. The model of stochastic volatility as a basic model has been chosen. For European options we could improve the…
Due to the increasing amount of electricity generated from renewable sources, uncertainty in power system operation will grow. This has implications for tools such as Optimal Power Flow (OPF), an optimization problem widely used in power…
The paper summarizes key results of the benchmark approach with a focus on the concept of benchmark-neutral pricing. It applies these results to the pricing of an extreme-maturity European put option on a well-diversified stock index. The…
We study the problem of active portfolio management where an investor aims to outperform a benchmark strategy's risk profile while not deviating too far from it. Specifically, an investor considers alternative strategies whose terminal…
Entropy based ideas find wide-ranging applications in finance for calibrating models of portfolio risk as well as options pricing. The abstracted problem, extensively studied in the literature, corresponds to finding a probability measure…
Valuation of Credit Valuation Adjustment (CVA) has become an important field as its calculation is required in Basel III, issued in 2010, in the wake of the credit crisis. Exposure, which is defined as the potential future loss of a default…
The geology of oil reservoirs is largely unknown. Consequently, the reservoir models used for production optimization are subject to significant uncertainty. To minimize the associated risk, the oil literature has mainly used ensemble-based…
We consider portfolio optimization under a preference model in a single-period, complete market. This preference model includes Yaari's dual theory of choice and quantile maximization as special cases. We characterize when the optimal…
We consider the problem of calculating risk-neutral implied volatilities of European options without relying on option mid prices but solely on bid and ask prices. We provide an approach, based on the conic finance paradigm, that allows to…
Many safety-critical control systems must operate under latent uncertainty that sensors cannot directly resolve at decision time. Such uncertainty, arising from unknown physical properties, exogenous disturbances, or unobserved environment…
This paper mathematically models a constant-function automated market maker (CFAMM) position as a portfolio of exotic options, known as perpetual American continuous-installment (CI) options. This model replicates an AMM position's delta at…
Tackling large approximate dynamic programming or reinforcement learning problems requires methods that can exploit regularities, or intrinsic structure, of the problem in hand. Most current methods are geared towards exploiting the…
This article proposes a new safety concept: backup plan safety. The backup plan safety is defined as the ability to complete one of the alternative missions in the case of primary mission abortion. To incorporate this new safety concept in…