Related papers: Robust Hedging of path-dependent options using a m…
It is well-known that using delta hedging to hedge financial options is not feasible in practice. Traders often rely on discrete-time hedging strategies based on fixed trading times or fixed trading prices (i.e., trades only occur if the…
We investigate pricing-hedging duality for American options in discrete time financial models where some assets are traded dynamically and others, e.g. a family of European options, only statically. In the first part of the paper we…
We consider the hedging of European options when the price of the underlying asset follows a single-factor Markovian framework. By working in such a setting, Carr and Wu \cite{carr2014static} derived a spanning relation between a given…
We propose a projection method to estimate risk-neutral moments from option prices. We derive a finite-sample bound implying that the projection estimator attains (up to a constant) the smallest pricing error within the span of traded…
With model uncertainty characterized by a convex, possibly non-dominated set of probability measures, the agent minimizes the cost of hedging a path dependent contingent claim with given expected success ratio, in a discrete-time,…
This paper presents a data-driven interpretable machine learning algorithm for semi-static hedging of Exchange Traded options, considering transaction costs with efficient run-time. Further, we provide empirical evidence on the performance…
We consider the problem of optimal investment and consumption in a class of multidimensional jump-diffusion models in which asset prices are subject to mutually exciting jump processes. This captures a type of contagion where each downward…
The two main issues for managing wrong way risk (WWR) for the credit valuation adjustment (CVA, i.e. WW-CVA) are calibration and hedging. Hence we start from a novel model-free worst-case approach based on static hedging of counterparty…
This study contributes to understanding Valuation Adjustments (xVA) by focussing on the dynamic hedging of Credit Valuation Adjustment (CVA), corresponding Profit & Loss (P&L) and the P&L explain. This is done in a Monte Carlo simulation…
In this work, I address the issue of forming riskless hedge in the continuous time option pricing model with stochastic stock volatility. I show that it is essential to verify whether the replicating portfolio is self-financing, in order…
In this paper, we focus on the problem of optimal portfolio-consumption policies in a multi-asset financial market, where the n risky assets follow Exponential Ornstein-Uhlenbeck processes, along with one risk-free bond. The investor's…
Portfolio selection in the periodic investment of securities modeled by a multivariate Merton model with dependent jumps is considered. The optimization framework is designed to maximize expected terminal wealth when portfolio risk is…
Navigating a collision-free and optimal trajectory for a robot is a challenging task, particularly in environments with moving obstacles such as humans. We formulate this problem as a stochastic optimal control problem. Since solving the…
In this paper we consider a method of solving optimal stopping problems in discrete and continuous time based on their dual representation. A novel and generic simulation-based optimization algorithm not involving nested simulations is…
Reducing financial risk is of paramount importance to investors, financial institutions, and corporations. Since the pioneering contribution of Johnson (1960), the optimal hedge ratio based on futures is regularly utilized. The current…
We find the variance-optimal equivalent martingale measure when multivariate assets are modeled by a regime-switching geometric Brownian motion, and the regimes are represented by a homogeneous continuous time Markov chain. Under this new…
In this article we introduce a portfolio optimisation framework, in which the use of rough path signatures (Lyons, 1998) provides a novel method of incorporating path-dependencies in the joint signal-asset dynamics, naturally extending…
We consider the problem of finding consistent upper price bounds and super replication strategies for exotic options, given the observation of call prices in the market. This field of research is called model-independent finance and has…
We present a new approach for studying the problem of optimal hedging of a European option in a finite and complete discrete-time market model. We consider partial hedging strategies that maximize the success probability or minimize the…
In this work, we develop an optimal transport (OT) based framework to select informative prototypical examples that best represent a given target dataset. Summarizing a given target dataset via representative examples is an important…