Related papers: Bertram's Pairs Trading Strategy with Bounded Risk
We propose a distributionally robust formulation of the traditional risk parity portfolio optimization problem. Distributional robustness is introduced by targeting the discrete probabilities attached to each observation used during…
We study optimal buying and selling strategies in target zone models. In these models the price is modeled by a diffusion process which is reflected at one or more barriers. Such models arise for example when a currency exchange rate is…
This paper studies the expected optimal value of a mixed 0-1 programming problem with uncertain objective coefficients following a joint distribution. We assume that the true distribution is not known exactly, but a set of independent…
In this paper, we consider a stochastic asset price model where the trend is an unobservable Ornstein Uhlenbeck process. We first review some classical results from Kalman filtering. Expectedly, the choice of the parameters is crucial to…
In this work we study a continuous time exponential utility maximization problem in the presence of a linear temporary price impact. More precisely, for the case where the risky asset is given by the Ornstein-Uhlenbeck diffusion process we…
We introduce a two-agent problem which is inspired by price asymmetry arising from funding difference. When two parties have different funding rates, the two parties deduce different fair prices for derivative contracts even under the same…
We expose a theoretical hedging optimization framework with variational preferences under convex risk measures. We explore a general dual representation for the composition between risk measures and utilities. We study the properties of the…
We study stochastic optimization problems with chance and risk constraints, where in the latter, risk is quantified in terms of the conditional value-at-risk (CVaR). We consider the distributionally robust versions of these problems, where…
We study multistage distributionally robust linear optimization, where the uncertainty set is defined as a ball of distribution centered at a scenario tree using the nested distance. The resulting minimax problem is notoriously difficult to…
Given the marginal distribution information of the underlying asset price at two future times $T_1$ and $T_2$, we consider the problem of determining a model-free upper bound on the price of a class of American options that must be…
We consider an investor facing a classical portfolio problem of optimal investment in a log-Brownian stock and a fixed-interest bond, but constrained to choose portfolio and consumption strategies that reduce a dynamic shortfall risk…
This paper studies an optimal investment-reinsurance problem for an insurer (she) under the Cram\'er--Lundberg model with monotone mean--variance (MMV) criterion. At any time, the insurer can purchase reinsurance (or acquire new business)…
Consider the problem of a central bank that wants to manage the exchange rate between its domestic currency and a foreign one. The central bank can purchase and sell the foreign currency, and each intervention on the exchange market leads…
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…
Motivated by recent advances in the spectral theory of auto-covariance matrices, we are led to revisit a reformulation of Markowitz' mean-variance portfolio optimization approach in the time domain. In its simplest incarnation it applies to…
Efficient methods to provide sub-optimal solutions to non-convex optimization problems with knowledge of the solution's sub-optimality would facilitate the widespread application of nonlinear optimal control algorithms. To that end,…
To execute a trade, participants in electronic equity markets may choose to submit limit orders or market orders across various exchanges where a stock is traded. This decision is influenced by the characteristics of the order flow and…
We address the problem of maximizing Gain from Trade (GFT) in repeated buyer-seller exchanges subject to global budget balance constraints. While this problem is well-understood in purely adversarial and stochastic settings, these…
In this paper, we combine modern portfolio theory and option pricing theory so that a trader who takes a position in a European option contract and the underlying assets can construct an optimal portfolio such that at the moment of the…
We study the problem of dynamically trading a futures contract and its underlying asset under a stochastic basis model. The basis evolution is modeled by a stopped scaled Brownian bridge to account for non-convergence of the basis at…