Related papers: Optimal FX Hedge Tenor with Liquidity Risk
In finance, sequential decision problems are often faced, for which reinforcement learning (RL) emerges as a promising tool for optimisation without the need of analytical tractability. However, the objective of classical RL is the expected…
Freight rate derivatives constitute a very popular financial tool in shipping industry, that allows to the market participants and the individuals operating in the field, to reassure their financial positions against the risk occurred by…
In this paper we investigate a new class of growth rate maximization problems based on impulse control strategies such that the average number of trades per time unit does not exceed a fixed level. Moreover, we include proportional…
Given the return series for a set of instruments, a \emph{trading strategy} is a switching function that transfers wealth from one instrument to another at specified times. We present efficient algorithms for constructing (ex-post) trading…
In this work, we consider the optimal portfolio selection problem under hard constraints on trading amounts, transaction costs and different rates for borrowing and lending when the risky asset returns are serially correlated. No…
This paper investigates the deep hedging framework, based on reinforcement learning (RL), for the dynamic hedging of swaptions, contrasting its performance with traditional sensitivity-based rho-hedging. We design agents under three…
This paper examines replication portfolio construction in incomplete markets - a key problem in financial engineering with applications in pricing, hedging, balance sheet management, and energy storage planning. We model this as a…
In this paper, we introduce a matrix-valued time series model for foreign exchange market. We then formulate trading matrices, foreign exchange options and return options (matrices), as well as on-line portfolio strategies. Moreover, we…
We study the problem of optimal portfolio selection in an illiquid market with discrete order flow. In this market, bids and offers are not available at any time but trading occurs more frequently near a terminal horizon. The investor can…
In Electricity markets, illiquidity, transaction costs and market price characteristics prevent managers to replicate exactly contracts. A residual risk is always present and the hedging strategy depends on a risk criterion chosen. We…
Money-back guarantees (MBGs) are features of pooled retirement income products that address bequest concerns by ensuring the initial premium is returned through lifetime payments or, upon early death, as a death benefit to the estate. This…
If financial markets displayed the informational efficiency postulated in the efficient markets hypothesis (EMH), arbitrage operations would be self-extinguishing. The present paper considers arbitrage sequences in foreign exchange (FX)…
This paper considers an optimal dividend distribution problem for an insurance company where the dividends are paid in a foreign currency. In the absence of dividend payments, our risk process follows a spectrally negative L\'evy process.…
In this paper, we adopted a net liability model which assesses both market risk on the liability side and revenue risk on the asset side for a Guaranteed Minimum Maturity Benefit (GMMB) embedded in variable annuity (VA) contracts. Numeric…
A theoretical method is empirically illustrated in finding the best time to forsake a loan such that the overall credit loss is minimised. This is predicated by forecasting the future cash flows of a loan portfolio up to the contractual…
This paper considers the optimal portfolio selection problem in a dynamic multi-period stochastic framework with regime switching. The risk preferences are of exponential (CARA) type with an absolute coefficient of risk aversion which…
In this chapter we first briefly review the existing approaches to hedging in rough volatility models. Next, we present a simple but general result which shows that in a one-factor rough stochastic volatility model, any option may be…
A novel optimisation framework through quadratic nonlinear projection is introduced for credit portfolio when the portfolio risk is measured by Conditional Value-at-Risk (CVaR). The whole optimisation procedure to search toward the optimal…
The aim of this paper is to investigate the impact of rebalancing frequency and transaction costs on the log-optimal portfolio, which is a portfolio that maximizes the expected logarithmic growth rate of an investor's wealth. We prove that…
This research proposes a novel arbitrage approach in multivariate pair trading, termed the Optimal Trading Technique (OTT). We present a method for selectively forming a "bucket" of fiat currencies anchored to cryptocurrency for monitoring…