Related papers: Risk-Management Methods for the Libor Market Model…
Distributionally robust control is a well-studied framework for optimal decision making under uncertainty, with the objective of minimizing an expected cost function over control actions, assuming the most adverse probability distribution…
The goal of this paper is to investigate new and simple convergence analysis of dynamic programming for linear quadratic regulator problem of discrete-time linear time-invariant systems. In particular, bounds on errors are given in terms of…
Interest rate market models, like the LIBOR market model, have the advantage that the basic model quantities are directly observable in financial markets. Inflation market models extend this approach to inflation markets, where zero-coupon…
We consider a broad class of dynamic programming (DP) problems that involve a partially linear structure and some positivity properties in their system equation and cost function. We address deterministic and stochastic problems, possibly…
We provide a general and tractable framework under which all multiple yield curve modeling approaches based on affine processes, be it short rate, Libor market, or HJM modeling, can be consolidated. We model a numeraire process and…
Recently, incomplete-market techniques have been used to develop a model applicable to credit default swaps (CDSs) with results obtained that are quite different from those obtained using the market-standard model. This article makes use of…
We consider the economic problem of optimal consumption and investment with power utility. We study the optimal strategy as the relative risk aversion tends to infinity or to one. The convergence of the optimal consumption is obtained for…
In this article we propose a study of market models starting from a set of axioms, as one does in the case of risk measures. We define a market model simply as a mapping from the set of adapted strategies to the set of random variables…
We consider a semimartingale market model when the underlying diffusion has a singular volatility matrix and compute the hedging portfolio for a given payoff function. Recently, the representation problem for such degenerate diffusions with…
Risk-aware control, though with promise to tackle unexpected events, requires a known exact dynamical model. In this work, we propose a model-free framework to learn a risk-aware controller with a focus on the linear system. We formulate it…
This paper demonstrates the efficiency of using Edgeworth and Gram-Charlier expansions in the calibration of the Libor Market Model with Stochastic Volatility and Displaced Diffusion (DD-SV-LMM). Our approach brings together two research…
Differentiable programming has recently received much interest as a paradigm that facilitates taking gradients of computer programs. While the corresponding flexible gradient-based optimization approaches so far have been used predominantly…
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…
Volatility Skew and Smile of Interest Rate products (Swaption and Caplet) are represented by SABR (Stochastic Alpha Beta Rho model). So, the Interest Rate derivatives model for pricing the callable exotic swaps should be comparable to the…
This paper considers consumption and portfolio optimization problems with recursive preferences in both infinite and finite time regions. Specially, the financial market consists of a risk-free asset and a risky asset that follows a general…
We present a new model for prediction markets, in which we use risk measures to model agents and introduce a market maker to describe the trading process. This specific choice on modelling tools brings us mathematical convenience. The…
Especially in the insurance industry interest rate models play a crucial role e.g. to calculate the insurance company's liabilities, performance scenarios or risk measures. A prominant candidate is the 2-Additive-Factor Gaussian Model…
We study the problem of optimally hedging the price exposure of liquidity positions in constant-product automated market makers (AMMs) when the hedge is funded by collateralized borrowing. A liquidity provider (LP) who borrows tokens to…
SOFR derivatives market remains illiquid and incomplete so it is not amenable to classical risk-neutral term structure models which are based on the assumption of perfect liquidity and completeness. This paper develops a statistical SOFR…
This paper considers an inexact primal-dual algorithm for semi-infinite programming (SIP) for which it provides general error bounds. To implement the dual variable update, we create a new prox function for nonnegative measures which turns…