Related papers: Quadratic Hedging and Optimization of Option Exerc…
This article presents fast lower and upper estimates for a large class of options: the class of constrained multiple exercise American options. Typical options in this class are swing options with volume and timing constraints, and passport…
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…
In a continuous-time model with multiple assets described by c\`{a}dl\`{a}g processes, this paper characterizes superhedging prices, absence of arbitrage, and utility maximizing strategies, under general frictions that make execution prices…
In this short note, we consider mean-variance optimized portfolios with transaction costs. We show that introducing quadratic transaction costs makes the optimization problem more difficult than using linear transaction costs. The reason…
The pricing and hedging of a general class of options (including American, Bermudan and European options) on multiple assets are studied in the context of currency markets where trading is subject to proportional transaction costs, and…
We consider the hedging error of a derivative due to discrete trading in the presence of a drift in the dynamics of the underlying asset. We suppose that the trader wishes to find rebalancing times for the hedging portfolio which enable him…
We propose \textit{DeepMartingale}, a deep-learning framework for the dual formulation of discrete-monitoring optimal stopping problems under continuous-time models. Leveraging a martingale representation, our method implements a…
Dealing with quadratic payments, marginal probability is usually considered ideally constant, maybe for the sake of initial simplicity. Considering the voting scenario depicted in "Quadratic Payments: A Primer" by Vitalik Buterin, firstly…
In this paper, we consider the problem of equal risk pricing and hedging in which the fair price of an option is the price that exposes both sides of the contract to the same level of risk. Focusing for the first time on the context where…
This study investigates the mean-variance (MV) trade-off in reinforcement learning (RL), an instance of the sequential decision-making under uncertainty. Our objective is to obtain MV-efficient policies whose means and variances are located…
This paper starts by defining the criteria where the early-exercise of an American option is never optimal, under positive, or negative rates. It follows with a short analysis of the various shapes of the exercise region under negative…
We investigate pricing-hedging duality for American options in discrete time financial models where some assets are traded dynamically and others, e.g. a family of European options, only statically. In the first part of the paper we…
We introduce a new approach for the numerical pricing of American options. The main idea is to choose a finite number of suitable excessive functions (randomly) and to find the smallest majorant of the gain function in the span of these…
The paper introduces and studies hedging for game (Israeli) style extension of swing options considered as multiple exercise derivatives. Assuming that the underlying security can be traded without restrictions we derive a formula for…
We apply a quadratic hedging scheme developed by Foellmer, Schweizer, and Sondermann to European contingent products whose underlying asset is modeled using a GARCH process and show that local risk-minimizing strategies with respect to the…
Optimal B-robust estimate is constructed for multidimensional parameter in drift coefficient of diffusion type process with small noise. Optimal mean-variance robust (optimal V -robust) trading strategy is find to hedge in mean-variance…
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 study the problem of option pricing and hedging strategies within the frame-work of risk-return arguments. An economic agent is described by a utility function that depends on profit (an expected value) and risk (a variance). In the…
We study the optimal timing of derivative purchases in incomplete markets. In our model, an investor attempts to maximize the spread between her model price and the offered market price through optimally timing her purchase. Both the…
This paper examines the volatility and covariance dynamics of cash and futures contracts that underlie the Optimal Hedge Ratio (OHR) across different hedging time horizons. We examine whether hedge ratios calculated over a short term…