Related papers: Risk-Control Strategies
This study introduces a dynamic investment framework to enhance portfolio management in volatile markets, offering clear advantages over traditional static strategies. Evaluates four conventional approaches : equal weighted, minimum…
We define and develop an approach for risk budgeting allocation - a risk diversification portfolio strategy - where risk is measured using a dynamic time-consistent risk measure. For this, we introduce a notion of dynamic risk contributions…
We introduce a new volatility model for option pricing that combines Markov switching with the Realized GARCH framework. This leads to a novel pricing kernel with a state-dependent variance risk premium and a pricing formula for European…
Energy markets are strategic to governments and economic development. Several commodities compete as substitutable energy sources and energy diversifiers. Such competition reduces the energy vulnerability of countries as well as portfolios'…
This paper presents iterative Sequential Action Control (iSAC), a receding horizon approach for control of nonlinear systems. The iSAC method has a closed-form open-loop solution, which is iteratively updated between time steps by…
We propose a unified framework for equity and credit risk modeling, where the default time is a doubly stochastic random time with intensity driven by an underlying affine factor process. This approach allows for flexible interactions…
We study a dynamic asset pricing problem in which a representative agent is ambiguous about the aggregate endowment growth rate and trades a risky stock, human capital, and a risk-free asset to maximize her preference value of consumption…
Usage-based insurance (UBI) uses telematics to align premiums with risk and encourage safe driving. However, deploying these programs is challenging due to heavy-tailed claim costs, nonstationary driver behavior, and limited incentive…
This paper studies the equal risk pricing (ERP) framework for the valuation of European financial derivatives. This option pricing approach is consistent with global trading strategies by setting the premium as the value such that the…
Cross-sectional "Information Coefficient" (IC) is a widely and deeply accepted measure in portfolio management. The paper gives an insight into IC in view of high-dimensional directional statistics: IC is a linear operator on the components…
We propose a new `hedged' Monte-Carlo (HMC) method to price financial derivatives, which allows to determine simultaneously the optimal hedge. The inclusion of the optimal hedging strategy allows one to reduce the financial risk associated…
The real options approach is now considered an effective alternative to the corporate DCF model for a feasibility study. The current paper offers a practical methodology employing binomial trees and real options techniques for evaluating…
Constant Proportion Portfolio Insurance (CPPI) is an investment strategy designed to give participation in the performance of a risky asset while protecting the invested capital. This protection is however not perfect and the gap risk must…
Predictive control is frequently used for control problems involving constraints. Being an optimization based technique utilizing a user specified so-called stage cost, performance properties, i.e., bounds on the infinite horizon…
Numerous empirical proofs indicate the adequacy of the time discrete auto-regressive stochastic volatility models introduced by Taylor in the description of the log-returns of financial assets. The pricing and hedging of contingent products…
We apply numerical dynamic programming techniques to solve discrete-time multi-asset dynamic portfolio optimization problems with proportional transaction costs and shorting/borrowing constraints. Examples include problems with multiple…
We devise an optimal allocation strategy for the execution of a predefined number of stocks in a given time frame using the technique of discrete-time Stochastic Control Theory for a defined market model. This market structure allows an…
We consider as given a discrete time financial market with a risky asset and options written on that asset and determine both the sub- and super-hedging prices of an American option in the model independent framework of ArXiv:1305.6008. We…
We analyze the relative price change of assets starting from basic supply/demand considerations subject to arbitrary motivations. The resulting stochastic differential equation has coefficients that are functions of supply and demand. We…
The aim of this paper is to study the optimal investment problem by using coherent acceptability indices (CAIs) as a tool to measure the portfolio performance. We call this problem the acceptability maximization. First, we study the…