Related papers: A pure dual approach for hedging Bermudan options
In most real scenarios the construction of a risk-neutral portfolio must be performed in discrete time and with transaction costs. Two human imposed constraints are the risk-aversion and the profit maximization, which together define a…
We present a simulation-and-regression method for solving dynamic portfolio allocation problems in the presence of general transaction costs, liquidity costs and market impacts. This method extends the classical least squares Monte Carlo…
This paper concerns the numerical solution of a fully nonlinear parabolic double obstacle problem arising from a finite portfolio selection with proportional transaction costs. We consider the optimal allocation of wealth among multiple…
We consider a semimartingale market model when the underlying diffusion has a singular volatility matrix and compute the hedging portfolio for a given payoff function. Recently, the representation problem for such degenerate diffusions with…
In a Markovian framework, we consider the problem of finding the minimal initial value of a controlled process allowing to reach a stochastic target with a given level of expected loss. This question arises typically in approximate hedging…
The Picard-Lefschetz theory has been attracting much attention as a tool to evaluate a multi-variable integral with a complex weight, which appears in various important problems in theoretical physics. The idea is to deform the integration…
We show that the Hedge algorithm, a method that is widely used in Machine Learning, can be interpreted as a particular instance of Dual Averaging schemes, which have recently been introduced by Nesterov for regret minimization. Based on…
This thesis investigates Merton's portfolio problem under two different rough Heston models, which have a non-Markovian structure. The motivation behind this choice of problem is due to the recent discovery and success of rough volatility…
This paper examines replication portfolio construction in incomplete markets - a key problem in financial engineering with applications in pricing, hedging, balance sheet management, and energy storage planning. We model this as a…
Financial derivative pricing is a significant challenge in finance, involving the valuation of instruments like options based on underlying assets. While some cases have simple solutions, many require complex classical computational methods…
We present an algorithm producing a dynamic non-self-financing hedging strategy in an incomplete market corresponding to investor-relevant risk criterion. The optimization is a two stage process that first determines admissible model…
We investigate the application of two heuristic methods, genetic algorithms and tabu/scatter search, to the optimisation of realistic portfolios. The model is based on the classical mean-variance approach, but enhanced with floor and…
Portfolio optimization is an important process in finance that consists in finding the optimal asset allocation that maximizes expected returns while minimizing risk. When assets are allocated in discrete units, this is a combinatorial…
Solving optimal stopping problems by backward induction in high dimensions is often very complex since the computation of conditional expectations is required. Typically, such computations are based on regression, a method that suffers from…
Traders are often faced with large block orders in markets with limited liquidity and varying volatility. Executing the entire order at once usually incurs a large trading cost because of this limited liquidity. In order to minimize this…
We consider robust pricing and hedging for options written on multiple assets given market option prices for the individual assets. The resulting problem is called the multi-marginal martingale optimal transport problem. We propose two…
This paper describes a fast and stable algorithm for evaluating Bermudan swaption under the two factor Hull-White model. We discretize the calculation of the expected value in the evaluation of Bermudan swaption by numerical integration,…
In this work, we introduce a Monte Carlo method for the dynamic hedging of general European-type contingent claims in a multidimensional Brownian arbitrage-free market. Based on bounded variation martingale approximations for…
We present an online parallel portfolio selection algorithm based on the island model commonly used for parallelization of evolutionary algorithms. In our case each of the islands runs a different optimization algorithm. The distributed…
Despite the empirical success of the rough Bergomi (rBergomi) model in modeling volatility dynamics, its practical use remains challenging due to high computational complexity in both pricing and calibration arising from its non-Markovian…