Related papers: Hedging Beyond the Mean: A Distributional Reinforc…

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…

We present a reinforcement-learning (RL) framework for dynamic hedging of equity index option exposures under realistic transaction costs and position limits. We hedge a normalized option-implied equity exposure (one unit of underlying…

Dynamic hedging is the practice of periodically transacting financial instruments to offset the risk caused by an investment or a liability. Dynamic hedging optimization can be framed as a sequential decision problem; thus, Reinforcement…

The objectives of option hedging/trading extend beyond mere protection against downside risks, with a desire to seek gains also driving agent's strategies. In this study, we showcase the potential of robust risk-aware reinforcement learning…

This paper investigates the deep hedging framework, based on reinforcement learning (RL), for the dynamic hedging of swaptions, contrasting its performance with traditional sensitivity-based rho-hedging. We design agents under three…

Traditional portfolio management methods can incorporate specific investor preferences but rely on accurate forecasts of asset returns and covariances. Reinforcement learning (RL) methods do not rely on these explicit forecasts and are…

We propose a new risk sensitive reinforcement learning approach for the dynamic hedging of options. The approach focuses on the minimization of the tail risk of the final P&L of the seller of an option. Different from most existing…

Reinforcement learning (RL) has shown significant promise for sequential portfolio optimization tasks, such as stock trading, where the objective is to maximize cumulative returns while minimizing risks using historical data. However,…

Recent advancements in Distributional Reinforcement Learning (DRL) for modeling loss distributions have shown promise in developing hedging strategies in derivatives markets. A common approach in DRL involves learning the quantiles of loss…

With the rapid development of artificial intelligence, data-driven methods effectively overcome limitations in traditional portfolio optimization. Conventional models primarily employ long-only mechanisms, excluding highly correlated assets…

Reinforcement learning (RL) is an innovative approach to financial decision making, offering specialized solutions to complex investment problems where traditional methods fail. This review analyzes 167 articles from 2017--2025, focusing on…

We develop a portfolio allocation framework that leverages deep learning techniques to address challenges arising from high-dimensional, non-stationary, and low-signal-to-noise market information. Our approach includes a dynamic embedding…

In this work we deal with the funding costs rising from hedging the risky securities underlying a target volatility strategy (TVS), a portfolio of risky assets and a risk-free one dynamically rebalanced in order to keep the realized…

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…

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…

Classical reinforcement learning (RL) techniques are generally concerned with the design of decision-making policies driven by the maximisation of the expected outcome. Nevertheless, this approach does not take into consideration the…

Risk-sensitive reinforcement learning (RL) is crucial for maintaining reliable performance in high-stakes applications. While traditional RL methods aim to learn a point estimate of the random cumulative cost, distributional RL (DRL) seeks…

In incomplete financial markets, pricing and hedging European options lack a unique no-arbitrage solution due to unhedgeable risks. This paper introduces a constrained deep learning approach to determine option prices and hedging strategies…

In the ever-changing and intricate landscape of financial markets, portfolio optimisation remains a formidable challenge for investors and asset managers. Conventional methods often struggle to capture the complex dynamics of market…

The deployment of autonomous AI agents in derivatives markets has widened a practical gap between static model calibration and realized hedging outcomes. We introduce two reinforcement learning frameworks, a novel Replication Learning of…