We consider a portfolio optimization problem for a utility maximizing investor who is simultaneously restricted by convex constraints on portfolio allocation and upper and lower bounds on terminal wealth. After introducing a capped version of the Legendre–Fenchel-transformation, we use it to...

This paper presents a comprehensive extension of pricing two-dimensional derivatives depending on two barrier constraints. We assume randomness on the covariance matrix as a way of generalizing. We analyse common barrier derivatives, enabling us to study parameter uncertainty and the risk...

In this paper, we propose a new multivariate mean-reverting model incorporating state-of-the art 4/2 stochastic volatility and a convenient principal component stochastic volatility (PCSV) decomposition for the stochastic covariance. We find a quasi closed-form characteristic function and...

This paper proposes an approximation method to create an optimal continuous-time portfolio strategy based on a combination of neural networks and Monte Carlo, named NNMC. This work is motivated by the increasing complexity of continuous-time models and stylized facts reported in the literature....

This paper proposes and investigates a multivariate 4/2 Factor Model. The name 4/2 comes from the superposition of a CIR term and a 3/2-model component. Our model goes multidimensional along the lines of a principal component and factor covariance decomposition. We find conditions for...