Related papers: Optimal forward contract design for inventory: a v…
This paper studies an open question in the warehouse problem where a merchant trading a commodity tries to find an optimal inventory-trading policy to decide on purchase and sale quantities during a fixed time horizon in order to maximize…
We consider an investor who is dynamically informed about the future evolution of one of the independent Brownian motions driving a stock's price fluctuations. With linear temporary price impact the resulting optimal investment problem with…
Differential equations can be used to construct predictive models of a diverse set of real-world phenomena like heat transfer, predator-prey interactions, and missile tracking. In our work, we explore one particular application of…
We investigate the problem of pricing and hedging derivatives of Electricity Futures contract when the underlying asset is not available. We propose to use a cross hedging strategy based on the Futures contract covering the larger delivery…
As is well known, average-cost optimality inequalities imply the existence of stationary optimal policies for Markov Decision Processes with average costs per unit time, and these inequalities hold under broad natural conditions. This paper…
Due to the increasing popularity of futures trading among financial market participants, the risk management of these instruments is crucial. In this paper, we introduce a model for estimating the ideal time for leaving a trading position…
The scope of this paper is to study the optimal stopping problems associated to a stochastic process, which may represent the gain of an investment, for which information on the final value is available a priori. This information may…
Adopting a probabilistic approach we determine the optimal dividend payout policy of a firm whose surplus process follows a controlled arithmetic Brownian motion and whose cash-flows are discounted at a stochastic dynamic rate. Dividends…
We formulate an optimal stopping problem for a geometric Brownian motion where the probability scale is distorted by a general nonlinear function. The problem is inherently time inconsistent due to the Choquet integration involved. We…
This paper studies the risk-adjusted optimal timing to liquidate an option at the prevailing market price. In addition to maximizing the expected discounted return from option sale, we incorporate a path-dependent risk penalty based on…
We investigate the optimal strategy over a finite time horizon for a portfolio of stock and bond and a derivative in an multiplicative Markovian market model with transaction costs (friction). The optimization problem is solved by a…
This paper presents a new prediction model for time series data by integrating a time-varying Geometric Brownian Motion model with a pricing mechanism used in financial engineering. Typical time series models such as Auto-Regressive…
We consider an insurance company modelling its surplus process by a Brownian motion with drift. Our target is to maximise the expected exponential utility of discounted dividend payments, given that the dividend rates are bounded by some…
We study the optimal investment and proportional reinsurance problem of an insurance company, whose investment preferences are described via a forward dynamic utility of exponential type in a stochastic factor model allowing for a possible…
Inventory models with lost sales and large lead times have traditionally been considered intractable due to the curse of dimensionality. Recently, Goldberg and co-authors laid the foundations for a new approach to solving these models, by…
The paper considers the optimal control problem of inventory of a discrete product in regeneration scheme with a Poisson flow of customer requirements. In the system deferred demand is allowed, the volume of which is limited by a given…
A master equation approach to the numerical solution of option pricing models is developed. The basic idea of the approach is to consider the Black--Scholes equation as the macroscopic equation of an underlying mesoscopic stochastic option…
The standard Black-Scholes theory of option pricing is extended to cope with underlying return fluctuations described by general probability distributions. A Langevin process and its related Fokker-Planck equation are devised to model the…
We investigate methods for pricing American options under the variance gamma model. The variance gamma process is a pure jump process which is constructed by replacing the calendar time by the gamma time in a Brownian motion with drift,…
In this paper, we construct a solution to the optimal contract problem for delegated portfolio management of the fist-best (risk-sharing) type. The novelty of our result is (i) in the robustness of the optimal contract with respect to…