Related papers: Reduced Form Capital Optimization
We consider a singular control problem with regime switching that arises in problems of optimal investment decisions of cash-constrained firms. The value function is proved to be the unique viscosity solution of the associated…
Accurate modeling of operational risk is important for a bank and the finance industry as a whole to prepare for potentially catastrophic losses. One approach to modeling operational is the loss distribution approach, which requires a bank…
We consider the problem of portfolio optimization in the presence of market impact, and derive optimal liquidation strategies. We discuss in detail the problem of finding the optimal portfolio under Expected Shortfall (ES) in the case of…
This paper derives -- considering a Gaussian setting -- closed form solutions of the statistics that Adrian and Brunnermeier and Acharya et al. have suggested as measures of systemic risk to be attached to individual banks. The statistics…
Collateral optimization refers to the systematic allocation of financial assets to satisfy obligations or secure transactions, while simultaneously minimizing costs and optimizing the usage of available resources. {This involves assessing…
The problem of solving Markov decision processes under function approximation remains a fundamental challenge, even under linear function approximation settings. A key difficulty arises from a geometric mismatch: while the Bellman…
In this work we rigorously establish mathematical models to obtain the capital valuation adjustment (KVA) as part of the total valuation adjustments (XVAs). For this purpose, we use a semi-replication strategy based on market theory. We…
The optimal stopping problem is a category of decision problems with a specific constrained configuration. It is relevant to various real-world applications such as finance and management. To solve the optimal stopping problem,…
In this short note, we study an optimization problem of expected implementation shortfall (IS) cost under general shaped market impact functions. In particular, we find that an optimal strategy is a VWAP (volume weighted average price)…
In optimization problems, the quality of a candidate solution can be characterized by the optimality gap. For most stochastic optimization problems, this gap must be statistically estimated. We show that for risk-averse problems, standard…
This paper considers a utility maximization and optimal asset allocation problem in the presence of a stochastic endowment that cannot be fully hedged through trading in the financial market. After studying continuity properties of the…
The minimum cost-flow problems have been attracted recently in optimization because of their applications in several areas of applied science and real life. Therefore, finding optima solution of these problems would be significant. Although…
On March 4th 2016 the Basel Committee on Banking Supervision published a consultative document where a new methodology, called the Standardized Measurement Approach (SMA), is introduced for computing Operational Risk regulatory capital for…
This paper studies the robust optimal gain selection problem for financial trading systems, formulated within a \emph{double linear policy} framework, which allocates capital across long and short positions. The key objective is to…
We address deterministic resource allocation in point-to-point multi-terminal AWGN channels without inter-terminal interference, with particular focus on optimizing quantile transmission rates for cell-edge terminal service. Classical…
We deal with the optimal execution problem when the broker's goal is to reach a performance barrier avoiding a downside barrier. The performance is provided by the wealth accumulated by trading in the market, the shares detained by the…
A systematic and automated framework for developing closed-loop flow control strategies is proposed, integrating suboptimal control theory [Lee et al., J. Fluid Mech. 358, 245 (1998)] with Bayesian optimization. The approach is demonstrated…
We present an alternating augmented Lagrangian method for convex optimization problems where the cost function is the sum of two terms, one that is separable in the variable blocks, and a second that is separable in the difference between…
In this paper, we propose a new Fully Composite Formulation of convex optimization problems. It includes, as a particular case, the problems with functional constraints, max-type minimization problems, and problems of Composite…
We consider an optimal investment and risk control problem for an insurer under the mean-variance (MV) criterion. By introducing a deterministic auxiliary process defined forward in time, we formulate an alternative time-consistent problem…