Related papers: Hedging Non-Tradable Risks with Transaction Costs …
Most work in mechanism design assumes that buyers are risk neutral; some considers risk aversion arising due to a non-linear utility for money. Yet behavioral studies have established that real agents exhibit risk attitudes which cannot be…
In recent decades, companies have frequently adopted share repurchase programs to return capital to shareholders or for other strategic purposes, instructing investment banks to rapidly buy back shares on their behalf. When the executing…
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…
In this paper, we investigate risk minimization problem of derivatives based on non-tradable underlyings by means of dynamic g-expectations which are slight different from conditional g-expectations. In this framework, inspired by [1] and…
In this paper we present an interacting-agent model of stock markets. We describe a stock market through an Ising-like model in order to formulate the tendency of traders getting to be influenced by the other traders' investment attitudes…
This paper studies a risk-sensitive decision-making problem under uncertainty. It considers a decision-making process that unfolds over a fixed number of stages, in which a decision-maker chooses among multiple alternatives, some of which…
Financial undertakings often have to deal with liabilities of the form 'non-hedgeable claim size times value of a tradeable asset', e.g. foreign property insurance claims times fx rates. Which strategy to invest in the tradeable asset is…
How to hedge factor risks without knowing the identities of the factors? We first prove a general theoretical result: even if the exact set of factors cannot be identified, any risky asset can use some portfolio of similar peer assets to…
We study a multiplicative transient price impact model for an illiquid financial market, where trading causes price impact which is multiplicative in relation to the current price, transient over time with finite rate of resilience, and…
In this paper, we employ the Heston stochastic volatility model to describe the stock's volatility and apply the model to derive and analyze the optimal trading strategies for dealers in a security market. We also extend our study to option…
We study the continuous time portfolio optimization model on the market where the mean returns of individual securities or asset categories are linearly dependent on underlying economic factors. We introduce the functional $Q_\gamma$…
The present paper provides a study of high-dimensional statistical arbitrage that combines factor models with the tools from stochastic control, obtaining closed-form optimal strategies which are both interpretable and computationally…
The autonomous trading agent is one of the most actively studied areas of artificial intelligence to solve the capital market portfolio management problem. The two primary goals of the portfolio management problem are maximizing profit and…
We consider the problem of optimal investment with random endowment in a Black--Scholes market for an agent with constant relative risk aversion. Using duality arguments, we derive an explicit expression for the optimal trading strategy,…
We study robust notions of good-deal hedging and valuation under combined uncertainty about the drifts and volatilities of asset prices. Good-deal bounds are determined by a subset of risk-neutral pricing measures such that not only…
In this work we study a finite horizon optimal liquidation problem with multiplicative price impact in algorithmic trading, using market orders. We analyze the case when an agent is trading on a market with two financial assets, whose…
The classical optimal trading problem is the closure of a position in an asset over a time interval; the trader maximizes an expected utility under the constraint that the position be fully closed by terminal time. Since the asset price is…
In this paper, we consider a risk-averse decision problem for controlled-diffusion processes, with dynamic risk measures, in which multiple risk-averse agents choose their decisions in such a way to minimize their individual accumulated…
In a fixed time horizon, appropriately executing a large amount of a particular asset -- meaning a considerable portion of the volume traded within this frame -- is challenging. Especially for illiquid or even highly liquid but also highly…
We study equilibrium feedback strategies for a family of dynamic mean-variance problems with competition among a large group of agents. We assume that the time horizon is random and each agent's risk aversion depends dynamically on the…