Related papers: Deep Hedging under Rough Volatility
We consider deep multivariate models for heterogeneous collections of random variables. In the context of computer vision, such collections may e.g. consist of images, segmentations, image attributes, and latent variables. When developing…
Based on the tree architecture, the objective of this paper is to design deep neural networks with two or more hidden layers (called deep nets) for realization of radial functions so as to enable rotational invariance for near-optimal…
Stochastic volatility models are the backbone of financial engineering. We study both continuous time diffusions as well as discrete time models. We propose two novel approaches to estimating stochastic volatility diffusions, one using…
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…
Abstract This paper proposes a novel approach to Bermudan swaption hedging by applying the deep hedging framework to address limitations of traditional arbitrage-free methods. Conventional methods assume ideal conditions, such as zero…
Feature propagation in Deep Neural Networks (DNNs) can be associated to nonlinear discrete dynamical systems. The novelty, in this paper, lies in letting the discretization parameter (time step-size) vary from layer to layer, which needs to…
We study the dynamic portfolio selection of an investor who uses deep learning methods to forecast stock market excess returns. In a two-asset allocation problem, deep neural networks -- both feedforward and long short-term memory (LSTM)…
This work focuses on the dynamic hedging of financial derivatives, where a reinforcement learning algorithm is designed to minimize the variance of the delta hedging process. In contrast to previous research in this area, we apply…
In this paper, we focus on the estimation of historical volatility of asset prices from high-frequency data. Stochastic volatility models pose a major statistical challenge: since in reality historical volatility is not observable, its…
Uncertainty quantification (UQ) in deep learning regression is of wide interest, as it supports critical applications including sequential decision making and risk-sensitive tasks. In heteroskedastic regression, where the uncertainty of the…
In recent years, deep architectures have been used for transfer learning with state-of-the-art performance in many datasets. The properties of their features remain, however, largely unstudied under the transfer perspective. In this work,…
Nonlocal neural networks have been proposed and shown to be effective in several computer vision tasks, where the nonlocal operations can directly capture long-range dependencies in the feature space. In this paper, we study the nature of…
We adopt deep learning models to directly optimise the portfolio Sharpe ratio. The framework we present circumvents the requirements for forecasting expected returns and allows us to directly optimise portfolio weights by updating model…
Volatility for financial assets returns can be used to gauge the risk for financial market. We propose a deep stochastic volatility model (DSVM) based on the framework of deep latent variable models. It uses flexible deep learning models to…
Deep learning models are widely used across computer vision and other domains. When working on the model induction, selecting the right architecture for a given dataset often relies on repetitive trial-and-error procedures. This procedure…
In safety-critical deep learning applications, robustness measures the ability of neural models that handle imperceptible perturbations in input data, which may lead to potential safety hazards. Existing pre-deployment robustness assessment…
We investigate model risk and distributionally robust optimization (DRO) under marginal and martingale constraints. Building on our previous work, we address the previously open case of static hedging with second-period maturity vanilla…
This paper shows how reinforcement learning can be used to derive optimal hedging strategies for derivatives when there are transaction costs. The paper illustrates the approach by showing the difference between using delta hedging and…
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…
In a market with a rough or Markovian mean-reverting stochastic volatility there is no perfect hedge. Here it is shown how various delta-type hedging strategies perform and can be evaluated in such markets in the case of European options. A…