Related papers: Testing for the Asymmetric Optimal Hedge Ratios: W…
We present three very simple variants of the classic Heads or Tails game using chips, each of which contributes to our understanding of the Bitcoin protocol. The first variant addresses the issue of temporary Bitcoin forks, which occur when…
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…
This paper will propose a novel machine learning based portfolio management method in the context of the cryptocurrency market. Previous researchers mainly focus on the prediction of the movement for specific cryptocurrency such as the…
A reputation of high volatility accompanies the emergence of Bitcoin as a financial asset. This paper intends to nuance this reputation and clarify our understanding of Bitcoin's volatility. Using daily, weekly, and monthly closing prices…
Duality for robust hedging with proportional transaction costs of path dependent European options is obtained in a discrete time financial market with one risky asset. Investor's portfolio consists of a dynamically traded stock and a static…
Quadratic hedging of option payoffs generates the variance optimal martingale measure. When an option features an exercise policy and its cash flows are hedged according to this approach, it may be tempting to optimize such a policy under…
This paper studies the optimal consumption under the addictive habit formation preference in markets with transaction costs and unbounded random endowments. To model the proportional transaction costs, we adopt the Kabanov's multi-asset…
Bitcoin uses blockchain technology to maintain transactions order and provides probabilistic guarantee to prevent double-spending, assuming that an attacker's computational power does not exceed %50 of the network power. In this paper, we…
We analyze the first and second moment risk premia in the Bitcoin market based on options and realized returns and contrast them to the premia embedded in the main US stock index market. First, Bitcoin is much more volatile and has a higher…
This paper investigates portfolio selection within a continuous-time financial market with regime-switching and beliefs-dependent utilities. The market coefficients and the investor's utility function both depend on the market regime, which…
We develop an optimal currency hedging strategy for fund managers who own foreign assets to choose the hedge tenors that maximize their FX carry returns within a liquidity risk constraint. The strategy assumes that the offshore assets are…
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…
This paper extends the results of the article [C. Kl\"{u}ppelberg and S. M. Pergamenchtchikov. Optimal consumption and investment with bounded downside risk for power utility functions. In Optimality and Risk: {\it Modern Trends in…
Optimal simple rules for the monetary policy of the first stochastically dominant crypto-currency are derived in a Dynamic Stochastic General Equilibrium (DSGE) model, in order to provide optimal responses to changes in inflation, output,…
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 uncertainties in future Bitcoin price make it difficult to accurately predict the price of Bitcoin. Accurately predicting the price for Bitcoin is therefore important for decision-making process of investors and market players in the…
In modern times, the cryptocurrency market is one of the world's most rapidly rising financial markets. The cryptocurrency market is regarded to be more volatile and illiquid than traditional markets such as equities, foreign exchange, and…
Consider an American option that pays G(X^*_t) when exercised at time t, where G is a positive increasing function, X^*_t := \sup_{s\le t}X_s, and X_s is the price of the underlying security at time s. Assuming zero interest rates, we show…
This study investigates three central questions in portfolio optimization. First, whether time-varying moment estimators outperform conventional sample estimators in practical portfolio construction. Second, whether incorporating a turnover…
We study a hypothesis testing problem in which data is compressed distributively and sent to a detector that seeks to decide between two possible distributions for the data. The aim is to characterize all achievable encoding rates and…