Related papers: The Feedback Effect of Hedging in Portfolio Optimi…
We consider the problem of option hedging in a market with proportional transaction costs. Since super-replication is very costly in such markets, we replace perfect hedging with an expected loss constraint. Asymptotic analysis for small…
The problem of stock hedging is reconsidered in this paper, where a put option is chosen from a set of available put options to hedge the market risk of a stock. A formula is proposed to determine the probability that the potential loss…
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…
This paper explores the effectiveness of high-frequency options trading strategies enhanced by advanced portfolio optimization techniques, investigating their ability to consistently generate positive returns compared to traditional long or…
In this paper, different approaches to portfolio optimization having higher moments such as skewness and kurtosis are classified so that the reader can observe different paradigms and approaches in this field of research which is essential…
The studied model was suggested to design a perfect hedging strategy for a large trader. In this case the implementation of a hedging strategy affects the price of the underlying security. The feedback-effect leads to a nonlinear version of…
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…
The optimization of large portfolios displays an inherent instability to estimation error. This poses a fundamental problem, because solutions that are not stable under sample fluctuations may look optimal for a given sample, but are, in…
We present a method for finding optimal hedging policies for arbitrary initial portfolios and market states. We develop a novel actor-critic algorithm for solving general risk-averse stochastic control problems and use it to learn hedging…
We introduce new mathematical methods to study the optimal portfolio size of investment portfolios over time, considering investors with varying skill levels. First, we explore the benefit of portfolio diversification on an annual basis for…
This paper studies some unconventional utility maximization problems when the ratio type relative portfolio performance is periodically evaluated over an infinite horizon. Meanwhile, the agent is prohibited from short-selling stocks. Our…
In this work we study the optimal execution problem with multiplicative price impact in algorithm trading, when an agent holds an initial position of shares of a financial asset. The inter-selling-decision times are modelled by the arrival…
We show how optimization methods from economics known as portfolio strategies can be used for minimizing download times in the Internet and travel times in freeway traffic. While for Internet traffic, there is an optimal restart frequency…
We consider an equity-linked contract whose payoff depends on the lifetime of policy holder and the stock price. We assume the limited capital for hedging and we provide with the best strategy for an insurance company in the meaning of so…
This paper studies the influences of a high-frequency trader (HFT) on a large trader whose future trading is predicted by the former. We conclude that HFT always front-runs and the large trader is benefited when: (1) there is sufficient…
We analyze the stability of financial investment networks, where financial institutions hold overlapping portfolios of assets. We consider the effect of portfolio diversification and heterogeneous investments using a random matrix dynamical…
Portfolio optimization is a task that investors use to determine the best allocations for their investments, and fund managers implement computational models to help guide their decisions. While one of the most common portfolio optimization…
In volatile financial markets, balancing risk and return remains a significant challenge. Traditional approaches often focus solely on equity allocation, overlooking the strategic advantages of options trading for dynamic risk hedging. This…
In the paper a problem of risk measures on a discrete-time market model with transaction costs is studied. Strategy effectiveness and shortfall risk is introduced. This paper is a generalization of quantile hedging presented in [4].
This work discusses the benefits of constrained portfolio turnover strategies for small to medium-sized portfolios. We propose a dynamic multi-period model that aims to minimize transaction costs and maximize terminal wealth levels whilst…