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The transition from defined benefit to defined contribution pension plans shifts the responsibility for saving toward retirement from governments and institutions to the individuals. Determining optimal saving and investment strategy for…
This paper investigates the application of deep deterministic policy gradient (DDPG) to intelligent reflecting surface (IRS) based unmanned aerial vehicles (UAV) assisted non-orthogonal multiple access (NOMA) downlink networks. The…
Volatility is a key variable in option pricing, trading and hedging strategies. The purpose of this paper is to improve the accuracy of forecasting implied volatility using an extension of genetic programming (GP) by means of dynamic…
Stock trading has always been a challenging task due to the highly volatile nature of the stock market. Making sound trading decisions to generate profit is particularly difficult under such conditions. To address this, we propose four…
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 propose a flexible framework for hedging a contingent claim by holding static positions in vanilla European calls, puts, bonds, and forwards. A model-free expression is derived for the optimal static hedging strategy that minimizes the…
Classical portfolio optimization often requires forecasting asset returns and their corresponding variances in spite of the low signal-to-noise ratio provided in the financial markets. Modern deep reinforcement learning (DRL) offers a…
The problem of stock hedging is reconsidered in this paper, where a put option is chosen from a set of available put options to hedge the market risk of a stock. A formula is proposed to determine the probability that the potential loss…
This paper investigates the optimal hedging strategies of an informed broker interacting with multiple traders in a financial market. We develop a theoretical framework in which the broker, possessing exclusive information about the drift…
Federal Energy Regulatory Commission (FERC) Orders 841 and 2222 have recommended that distributed energy resources (DERs) should participate in energy and reserve markets; therefore, a mechanism needs to be developed to facilitate DERs'…
Dynamic hedging strategies are essential for effective risk management in derivatives markets, where volatility and market sentiment can greatly impact performance. This paper introduces a novel framework that leverages large language…
Deep reinforcement learning (DRL) has been widely studied in the portfolio management task. However, it is challenging to understand a DRL-based trading strategy because of the black-box nature of deep neural networks. In this paper, we…
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…
The dynamic hedging theory only makes sense in the setup of one given model, whereas the practice of dynamic hedging is just the opposite, with models fleeing after the data through daily recalibration. This is quite of a quantitative…
We study the explicit calculation of the set of superhedging portfolios of contingent claims in a discrete-time market model for d assets with proportional transaction costs. The set of superhedging portfolios can be obtained by a recursive…
This paper presents a Double Deep Q-Network algorithm for trading single assets, namely the E-mini S&P 500 continuous futures contract. We use a proven setup as the foundation for our environment with multiple extensions. The features of…
Mathematical modelling is ubiquitous in the financial industry and drives key decision processes. Any given model provides only a crude approximation to reality and the risk of using an inadequate model is hard to detect and quantify. By…
This study contributes to understanding Valuation Adjustments (xVA) by focussing on the dynamic hedging of Credit Valuation Adjustment (CVA), corresponding Profit & Loss (P&L) and the P&L explain. This is done in a Monte Carlo simulation…
It is well documented that a model for the underlying asset price process that seeks to capture the behaviour of the market prices of vanilla options needs to exhibit both diffusion and jump features. In this paper we assume that the asset…
Mobile Edge Computing (MEC) has been regarded as a promising paradigm to reduce service latency for data processing in the Internet of Things, by provisioning computing resources at the network edge. In this work, we jointly optimize the…