Related papers: Hedging problems for Asian options with transactio…
The cryptocurrency market is volatile, non-stationary and non-continuous. Together with liquid derivatives markets, this poses a unique opportunity to study risk management, especially the hedging of options, in a turbulent market. We study…
American options in a multi-asset market model with proportional transaction costs are studied in the case when the holder of an option is able to exercise it gradually at a so-called mixed (randomised) stopping time. The introduction of…
We construct a sequence of functions that uniformly converge (on compact sets) to the price of Asian option, which is written on a stock whose dynamics follows a jump diffusion, exponentially fast. Each of the element in this sequence…
The effect of proportional transaction costs on systematically generated portfolios is studied empirically. The performance of several portfolios (the index tracking portfolio, the equally-weighted portfolio, the entropy-weighted portfolio,…
This paper addresses the trade-off between internalisation and externalisation in the management of stochastic trade flows. We consider agents who must absorb flows and manage risk by deciding whether to warehouse it or hedge in the market,…
We describe the pricing and hedging of financial options without the use of probability using rough paths. By encoding the volatility of assets in an enhancement of the price trajectory, we give a pathwise presentation of the replication of…
This paper discusses the short-maturity behavior of Asian option prices and hedging portfolios. We consider the risk-neutral valuation and the delta value of the Asian option having a H\"older continuous payoff function in a local…
An investor with constant relative risk aversion trades a safe and several risky assets with constant investment opportunities. For a small fixed transaction cost, levied on each trade regardless of its size, we explicitly determine the…
We consider a portfolio with call option and the corresponding underlying asset under the standard assumption that stock-market price represents a random variable with lognormal distribution. Minimizing the variance (hedging risk) of the…
This survey reviews portfolio selection problem for long-term horizon. We consider two objectives: (i) maximize the probability for outperforming a target growth rate of wealth process (ii) minimize the probability of falling below a target…
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…
We study partial hedging for game options in markets with transaction costs bounded from below. More precisely, we assume that the investor's transaction costs for each trade are the maximum between proportional transaction costs and a…
The method and characteristics of several approaches to the pricing of discretely monitored arithmetic Asian options on stocks with discrete, absolute dividends are described. The contrast between method behaviors for options with an Asian…
We develop a tractable framework for valuing Asian options when trading the underlying generates market impact and execution costs. Starting from a discrete-time, quote-level model, we construct a reference midpoint suitable for Asian…
We study the arbitrage opportunities in the presence of transaction costs in a sequence of binary markets approximating the fractional Black-Scholes model. This approximating sequence was constructed by Sottinen and named fractional binary…
Value adjustment of uncollateralized trades is determined within a risk-neutral pricing framework. When hedging such trades, investors cannot freely trade protection on their own name, thus facing an incomplete market. This fact is…
Optimal execution of a portfolio have been a challenging problem for institutional investors. Traders face the trade-off between average trading price and uncertainty, and traditional methods suffer from the curse of dimensionality. Here,…
We present a numerically efficient approach for learning a risk-neutral measure for paths of simulated spot and option prices up to a finite horizon under convex transaction costs and convex trading constraints. This approach can then be…
We revisit optimal execution of an active portfolio in the presence of slippage (aka linear, proportional, or absolute-value) costs. Market efficiency implies a close balance between active alphas and trading costs, so even small changes to…
We study the optimal portfolio liquidation problem over a finite horizon in a limit order book with bid-ask spread and temporary market price impact penalizing speedy execution trades. We use a continuous-time modeling framework, but in…