Related papers: A pure dual approach for hedging Bermudan options
This paper introduces a set of algorithms for Monte-Carlo Bayesian reinforcement learning. Firstly, Monte-Carlo estimation of upper bounds on the Bayes-optimal value function is employed to construct an optimistic policy. Secondly,…
This paper addresses the problem of pricing involved financial derivatives by means of advanced of deep learning techniques. More precisely, we smartly combine several sophisticated neural network-based concepts like differential machine…
This paper introduces a novel methodology for the pricing and management of share buyback contracts, overcoming the limitations of traditional optimal control methods, which frequently encounter difficulties with high-dimensional state…
This paper presents hedging strategies for European and exotic options in a Levy market. By applying Taylor's Theorem, dynamic hedging portfolios are con- structed under different market assumptions, such as the existence of power jump…
This paper considers the finite horizon portfolio rebalancing problem in terms of mean-variance optimization, where decisions are made based on current information on asset returns and transaction costs. The study's novelty is that the…
This paper sets up a methodology for approximately solving optimal investment problems using duality methods combined with Monte Carlo simulations. In particular, we show how to tackle high dimensional problems in incomplete markets, where…
The duality between the robust (or equivalently, model independent) hedging of path dependent European options and a martingale optimal transport problem is proved. The financial market is modeled through a risky asset whose price is only…
A number of Bermudan option pricing methods that are applicable to options on multiple assets are studied in this thesis, one of the dominating questions being the natural scaling needed to extrapolate from Bermudan to American (both…
Nowadays many financial derivatives, such as American or Bermudan options, are of early exercise type. Often the pricing of early exercise options gives rise to high-dimensional optimal stopping problems, since the dimension corresponds to…
Finding the hedge ratios for a portfolio and risk compression is the same mathematical problem. Traditionally, regression is used for this purpose. However, regression has its own limitations. For example, in a regression model, we can't…
Recombinant binomial trees are binary trees where each non-leaf node has two child nodes, but adjacent parents share a common child node. Such trees arise in finance when pricing an option. For example, valuation of a European option can be…
We study the problem of super-replication for game options under proportional transaction costs. We consider a multidimensional continuous time model, in which the discounted stock price process satisfies the conditional full support…
This paper addresses a novel \emph{cost-sensitive} distributionally robust log-optimal portfolio problem, where the investor faces \emph{ambiguous} return distributions, and a general convex transaction cost model is incorporated. The…
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 a method for extending a given asset pricing formula to account for two additional sources of risk: the risk associated with future changes in market--calibrated parameters and the remaining risk associated with idiosyncratic…
Hamiltonian Monte Carlo is a widely used algorithm for sampling from posterior distributions of complex Bayesian models. It can efficiently explore high-dimensional parameter spaces guided by simulated Hamiltonian flows. However, the…
In this article we consider the problem of pricing and hedging high-dimensional Asian basket options by Quasi-Monte Carlo simulation. We assume a Black-Scholes market with time-dependent volatilities and show how to compute the deltas by…
In this paper, we present a computationally efficient technique based on the \emph{Method of Lines} (MOL) for the approximation of the Bermudan option values via the associated partial differential equations (PDEs). The MOL converts the…
Hedging a portfolio containing autocallable notes presents unique challenges due to the complex risk profile of these financial instruments. In addition to hedging, pricing these notes, particularly when multiple underlying assets are…
This article develops the theory of risk budgeting portfolios, when we would like to impose weight constraints. It appears that the mathematical problem is more complex than the traditional risk budgeting problem. The formulation of the…