相关论文: Option pricing and hedging with minimum local expe…
We study indifference pricing of exotic derivatives by using hedging strategies that take static positions in quoted derivatives but trade the underlying and cash dynamically over time. We use real quotes that come with bid-ask spreads and…
In this paper, we search for optimal portfolio strategies in the presence of various risk measure that are common in financial applications. Particularly, we deal with the static optimization problem with respect to Value at Risk, Expected…
An investor faced with a contingent claim may eliminate risk by perfect hedging, but as it is often quite expensive, he seeks partial hedging (quantile hedging or efficient hedging) that requires less capital and reduces the risk. Efficient…
We propose a method for extending a given asset pricing formula to account for two additional sources of risk: the risk associated with future changes in market--calibrated parameters and the remaining risk associated with idiosyncratic…
We develop methods to solve general optimal stopping problems with opportunities to stop that arrive randomly. Such problems occur naturally in applications with market frictions. Pivotal to our approach is that our methods operate on…
In this paper we analyze a nonlinear Black--Scholes model for option pricing under variable transaction costs. The diffusion coefficient of the nonlinear parabolic equation for the price $V$ is assumed to be a function of the underlying…
We construct a statistical indicator for the detection of short-term asset price bubbles based on the information content of bid and ask market quotes for plain vanilla put and call options. Our construction makes use of the martingale…
The question of pricing and hedging a given contingent claim has a unique solution in a complete market framework. When some incompleteness is introduced, the problem becomes however more difficult. Several approaches have been adopted in…
Sequential Monte Carlo (SMC) methods have successfully been used in many applications in engineering, statistics and physics. However, these are seldom used in financial option pricing literature and practice. This paper presents SMC method…
We consider Monte-Carlo discretizations of partial differential equations based on a combination of semi-lagrangian schemes and probabilistic representations of the solutions. We study the Monte-Carlo error in a simple case, and show that…
This paper sets up a methodology for approximately solving optimal investment problems using duality methods combined with Monte Carlo simulations. In particular, we show how to tackle high dimensional problems in incomplete markets, where…
We provide a model-free pricing-hedging duality in continuous time. For a frictionless market consisting of $d$ risky assets with continuous price trajectories, we show that the purely analytic problem of finding the minimal superhedging…
The paper introduces and studies hedging for game (Israeli) style extension of swing options considered as multiple exercise derivatives. Assuming that the underlying security can be traded without restrictions we derive a formula for…
We present a framework for hedging a portfolio of derivatives in the presence of market frictions such as transaction costs, market impact, liquidity constraints or risk limits using modern deep reinforcement machine learning methods. We…
We present a new Monte Carlo methodology for the accurate estimation of the distribution of the sum of dependent log-normal random variables. The methodology delivers statistically unbiased estimators for three distributional quantities of…
We describe an embarrassingly parallel, anytime Monte Carlo method for likelihood-free models. The algorithm starts with the view that the stochasticity of the pseudo-samples generated by the simulator can be controlled externally by a…
The binomial tree method and the Monte Carlo (MC) method are popular methods for solving option pricing problems. However in both methods there is a trade-off between accuracy and speed of computation, both of which are important in…
A standing assumption in the literature on proportional transaction costs is efficient friction. Together with robust no free lunch with vanishing risk, it rules out strategies of infinite variation, as they usually appear in frictionless…
In this paper we propose an efficient method to compute the price of multi-asset American options, based on Machine Learning, Monte Carlo simulations and variance reduction technique. Specifically, the options we consider are written on a…
When trading American and Asian options in the FX derivatives market, banks must calculate prices using a complex mathematical model. It is often observed that different models produce varying prices for the same exotic option, which…