Related papers: Testing for the Asymmetric Optimal Hedge Ratios: W…
This paper proposes a novel approach to hedging portfolios of risky assets when financial markets are affected by financial turmoils. We introduce a completely novel approach to diversification activity not on the level of single assets but…
We propose a modelling framework for the optimal selection of crypto assets. Crypto assets differ by two essential features: security (technological) and stability (governance). Investors make choices over crypto assets similarly to how…
A risk-averse agent hedges her exposure to a non-tradable risk factor $U$ using a correlated traded asset $S$ and accounts for the impact of her trades on both factors. The effect of the agent's trades on $U$ is referred to as cross-impact.…
Experimentation in online digital platforms is used to inform decision making. Specifically, the goal of many experiments is to optimize a metric of interest. Null hypothesis statistical testing can be ill-suited to this task, as it is…
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…
We study the problem of dynamically trading a futures contract and its underlying asset under a stochastic basis model. The basis evolution is modeled by a stopped scaled Brownian bridge to account for non-convergence of the basis at…
We develop a dynamic model of the Bitcoin market where users set fees themselves and miners decide whether to operate and whom to validate based on those fees. Our analysis reveals how, in equilibrium, users adjust their bids in response to…
We study a static portfolio optimization problem with two risk measures: a principle risk measure in the objective function and a secondary risk measure whose value is controlled in the constraints. This problem is of interest when it is…
We present a method of hedging Conditional Value at Risk of a position in stock using put options. The result leads to a linear programming problem that can be solved to optimise risk hedging.
We present a numerically efficient approach for learning a risk-neutral measure for paths of simulated spot and option prices up to a finite horizon under convex transaction costs and convex trading constraints. This approach can then be…
In coin tossing two remote participants want to share a uniformly distributed random bit. At the least in the quantum version, each participant test whether or not the other has attempted to create a bias on this bit. It is requested that,…
It is shown that delta hedging provides the optimal trading strategy in terms of minimal required initial capital to replicate a given terminal payoff in a continuous-time Markovian context. This holds true in market models where no…
This paper explores the implications of producing forecast distributions that are optimized according to scoring rules that are relevant to financial risk management. We assess the predictive performance of optimal forecasts from…
We study online optimization in a setting where an online learner seeks to optimize a per-round hitting cost, which may be non-convex, while incurring a movement cost when changing actions between rounds. We ask: \textit{under what general…
We engineer blockchain based risk managed portfolios by creating three funds with distinct risk and return profiles: 1) Alpha - high risk portfolio; 2) Beta - mimics the wider market; and 3) Gamma - represents the risk free rate adjusted to…
In this work, we study the optimal discretization error of stochastic integrals, in the context of the hedging error in a multidimensional It\^{o} model when the discrete rebalancing dates are stopping times. We investigate the convergence,…
The technique of ``testing by betting" frames nonparametric sequential hypothesis testing as a multiple-round game, where a player bets on future observations that arrive in a streaming fashion, accumulates wealth that quantifies evidence…
In a market with a rough or Markovian mean-reverting stochastic volatility there is no perfect hedge. Here it is shown how various delta-type hedging strategies perform and can be evaluated in such markets in the case of European options. A…
We consider an optimal investment and consumption problem for a Black-Scholes financial market with stochastic coefficients driven by a diffusion process. We assume that an agent makes consumption and investment decisions based on CRRA…
We revisit optimal execution of an active portfolio in the presence of slippage (aka linear, proportional, or absolute-value) costs. Market efficiency implies a close balance between active alphas and trading costs, so even small changes to…