Related papers: Optimal FX Hedge Tenor with Liquidity Risk
Portfolio selection in the periodic investment of securities modeled by a multivariate Merton model with dependent jumps is considered. The optimization framework is designed to maximize expected terminal wealth when portfolio risk is…
Recent developments in deep learning techniques have motivated intensive research in machine learning-aided stock trading strategies. However, since the financial market has a highly non-stationary nature hindering the application of…
It is well known that the minimal superhedging price of a contingent claim is too high for practical use. In a continuous-time model uncertainty framework, we consider a relaxed hedging criterion based on acceptable shortfall risks.…
We present a new approach for studying the problem of optimal hedging of a European option in a finite and complete discrete-time market model. We consider partial hedging strategies that maximize the success probability or minimize the…
We address the problem of portfolio optimization under the simplest coherent risk measure, i.e. the expected shortfall. As it is well known, one can map this problem into a linear programming setting. For some values of the external…
We consider an agent who needs to buy (or sell) a relatively small amount of asset over some fixed short time interval. We work at the highest frequency meaning that we wish to find the optimal tactic to execute our quantity using limit…
This paper develops the first closed-form optimal portfolio allocation formula for a spot asset whose variance follows a GARCH(1,1) process. We consider an investor with constant relative risk aversion (CRRA) utility who wants to maximize…
The Foreign Exchange (Forex) is a large decentralized market, on which trading analysis and algorithmic trading are popular. Research efforts have been focusing on proof of efficiency of certain technical indicators. We demonstrate,…
We examine the Foreign Exchange (FX) spot price spreads with and without Last Look on the transaction. We assume that brokers are risk-neutral and they quote spreads so that losses to latency arbitrageurs (LAs) are recovered from other…
Goal-based investing is concerned with reaching a monetary investment goal by a given finite deadline, which differs from mean-variance optimization in modern portfolio theory. In this article, we expand the close connection between…
An investor with constant absolute risk aversion trades a risky asset with general It\^o-dynamics, in the presence of small proportional transaction costs. In this setting, we formally derive a leading-order optimal trading policy and the…
The duality between the robust (or equivalently, model independent) hedging of path dependent European options and a martingale optimal transport problem is proved. The financial market is modeled through a risky asset whose price is only…
We consider an insurance entity endowed with an initial capital and a surplus process modelled as a Brownian motion with drift. It is assumed that the company seeks to maximise the cumulated value of expected discounted dividends, which are…
We build a simple model of leveraged asset purchases with margin calls. Investment funds use what is perhaps the most basic financial strategy, called "value investing", i.e. systematically attempting to buy underpriced assets. When funds…
Multifractal detrended cross-correlation methodology is described and applied to Foreign exchange (Forex) market time series. Fluctuations of high frequency exchange rates of eight major world currencies over 2010-2018 period are used to…
The role of collateral in derivative pricing has evolved beyond credit risk mitigation, particularly following the global financial crisis, when funding costs and basis spreads became central to valuation practices. This development…
This paper quantitatively explores the interaction effect of forward guidance (FG) on international monetary policy transmission using a standard two-country new Keynesian model with a global liquidity trap. First, we show that the…
In a universe with a single currency, there would be no foreign exchange market, no foreign exchange rates, and no foreign exchange. Over the past twenty-five years, the way the market has performed those tasks has changed enormously. The…
The lead-lag relationship plays a vital role in financial markets. It is the phenomenon where a certain price-series lags behind and partially replicates the movement of leading time-series. The present research proposes a new technique…
We consider rate swaps which pay a fixed rate against a floating rate in presence of bid-ask spread costs. Even for simple models of bid-ask spread costs, there is no explicit strategy optimizing an expected function of the hedging error.…