Related papers: Robust Hedging of path-dependent options using a m…
We study the influence of additional intermediate marginal distributions on the value of the martingale optimal transport problem. From a financial point of view, this corresponds to taking into account call option prices not only, as…
We derive a closed form portfolio optimization rule for an investor who is diffident about mean return and volatility estimates, and has a CRRA utility. The novelty is that confidence is here represented using ellipsoidal uncertainty sets…
We present a robust Deep Hedging framework for the pricing and hedging of option portfolios that significantly improves training efficiency and model robustness. In particular, we propose a neural model for training model embeddings which…
The paper investigates quadratic hedging in a semimartingale market that does not necessarily contain a risk-free asset. An equivalence result for hedging with and without numeraire change is established. This permits direct computation of…
We solve an expected utility-maximization problem with a Value-at-risk constraint on the terminal portfolio value in an incomplete financial market due to stochastic volatility. To derive the optimal investment strategy, we use the dynamic…
In this paper, we study a semi-martingale optimal transport problem and its application to the calibration of Local-Stochastic Volatility (LSV) models. Rather than considering the classical constraints on marginal distributions at initial…
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…
In a financial market model, we consider the variance-optimal semi-static hedging of a given contingent claim, a generalization of the classic variance-optimal hedging. To obtain a tractable formula for the expected squared hedging error…
This paper studies the finite horizon portfolio management by optimally tracking a ratcheting capital benchmark process. It is assumed that the fund manager can dynamically inject capital into the portfolio account such that the total…
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…
We price and replicate a variety of claims written on the log price $X$ and quadratic variation $[X]$ of a risky asset, modeled as a positive semimartingale, subject to stochastic volatility and jumps. The pricing and hedging formulas do…
We study optimal investment strategies that maximize expected utility from consumption and terminal wealth in a pure-jump asset price model with Markov-modulated (regime switching) jump-size distributions. We give sufficient conditions for…
In this article we consider the problem of giving a robust, model-independent, lower bound on the price of a forward starting straddle with payoff $|F_{T_1} - F_{T_0}|$ where $0<T_0<T_1$. Rather than assuming a model for the underlying…
An unconventional approach for optimal stopping under model ambiguity is introduced. Besides ambiguity itself, we take into account how ambiguity-averse an agent is. This inclusion of ambiguity attitude, via an $\alpha$-maxmin nonlinear…
Motivated by empirical evidence for rough volatility models, this paper investigates continuous-time mean-variance (MV) portfolio selection under the Volterra Heston model. Due to the non-Markovian and non-semimartingale nature of the…
This paper investigates the use of multiple directions of stratification as a variance reduction technique for Monte Carlo simulations of path-dependent options driven by Gaussian vectors. The precision of the method depends on the choice…
We study a stochastic control approach to managed futures portfolios. Building on the Schwartz 97 stochastic convenience yield model for commodity prices, we formulate a utility maximization problem for dynamically trading a single-maturity…
We investigate the relation between the fair price for European-style vanilla options and the distribution of short-term returns on the underlying asset ignoring transaction and other costs. We compute the risk-neutral probability density…
In this paper, we consider the portfolio optimization problem in a financial market where the underlying stochastic volatility model is driven by n-dimensional Brownian motions. At first, we derive a Hamilton-Jacobi-Bellman equation…
In this paper, we consider the pricing and hedging of a financial derivative for an insider trader, in a model-independent setting. In particular, we suppose that the insider wants to act in a way which is independent of any modelling…