Related papers: Hedging problems for Asian options with transactio…
Nearly one-half of all trades in financial markets are executed by high-speed, autonomous computer programs -- a type of trading often called high-frequency trading (HFT). Although evidence suggests that HFT increases the efficiency of…
With model uncertainty characterized by a convex, possibly non-dominated set of probability measures, the agent minimizes the cost of hedging a path dependent contingent claim with given expected success ratio, in a discrete-time,…
Portfolio optimisation typically aims to provide an optimal allocation that minimises risk, at a given return target, by diversifying over different investments. However, the potential scope of such risk diversification can be limited if…
The paper introduces a limit version of multiple stopping options such that the holder selects dynamically a weight function that control the distribution of the payments (benefits) over time. In applications for commodities and energy…
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…
Funds at large portfolio management firms may consist of many portfolio managers (PMs), each managing a portion of the fund and optimizing a distinct objective. Although the PMs determine their trades independently, the trade lists may be…
In volatile financial markets, balancing risk and return remains a significant challenge. Traditional approaches often focus solely on equity allocation, overlooking the strategic advantages of options trading for dynamic risk hedging. This…
This paper investigates a continuous-time portfolio optimization problem with the following features: (i) a no-short selling constraint; (ii) a leverage constraint, that is, an upper limit for the sum of portfolio weights; and (iii) a…
In this note we consider the maximization of the expected terminal wealth for the setup of quadratic transaction costs. First, we provide a very simple probabilistic solution to the problem. Although the problem was largely studied, as far…
Incomplete financial markets are considered, defined by a multi-dimensional non-homogeneous diffusion process, being the direct sum of an It\^{o} process (the price process), and another non-homogeneous diffusion process (the exogenous…
This paper gives a brief overview on the nonparametric techniques that are useful for financial econometric problems. The problems include estimation and inferences of instantaneous returns and volatility functions of time-homogeneous and…
The time average of geometric Brownian motion plays a crucial role in the pricing of Asian options in mathematical finance. In this paper we consider the asymptotics of the discrete-time average of a geometric Brownian motion sampled on…
Geometric Asian options are a type of options where the payoff depends on the geometric mean of the underlying asset over a certain period of time. This paper is concerned with the pricing of such options for the class of Volterra-Heston…
Finding the hedge ratios for a portfolio and risk compression is the same mathematical problem. Traditionally, regression is used for this purpose. However, regression has its own limitations. For example, in a regression model, we can't…
We consider the mean-variance hedging problem under partial Information. The underlying asset price process follows a continuous semimartingale and strategies have to be constructed when only part of the information in the market is…
We propose a new non parametric technique to estimate the CALL function based on the superhedging principle. Our approach does not require absence of arbitrage and easily accommodates bid/ask spreads and other market imperfections. We prove…
We propose a versatile Monte-Carlo method for pricing and hedging options when the market is incomplete, for an arbitrary risk criterion (chosen here to be the expected shortfall), for a large class of stochastic processes, and in the…
The paper investigates quadratic hedging in a semimartingale market that does not necessarily contain a risk-free asset. An equivalence result for hedging with and without numeraire change is established. This permits direct computation of…
Transaction costs appear in financial markets in more than one form. There are several results in the literature on small proportional transaction cost and not that many on fixed transaction cost. In the present work, we heuristically study…
In this paper we present some results on Geometric Asian option valuation for affine stochastic volatility models with jumps. We shall provide a general framework into which several different valuation problems based on some average process…