Preface -- Introduction -- Trading under the Ornstein-Uhlenbeck model -- Trading under the exponential OU model -- Trading under the CIR model -- Futures trading under mean reversion -- Optimal liquidation of options -- Trading credit derivatives -- Bibliography -- Index

This book provides a systematic study on the optimal timing of trades in markets with mean-reverting price dynamics. We present a financial engineering approach that distills the core mathematical questions from different trading problems, and also incorporates the practical aspects of trading,...

This paper studies the problem of trading futures with transaction costs when the underlying spot price is mean-reverting. Specifically, we model the spot dynamics by the Ornstein-Uhlenbeck (OU), Cox-Ingersoll-Ross (CIR), or exponential Ornstein-Uhlenbeck (XOU) model. The futures term structure...

We analyze the American option valuation problem with the forward performance criterion introduced by Musiela and Zariphopoulou (2008). In this framework, utility evolves forward in time without reference to a specific future time horizon. Moreover, risk preferences change with stochastic market...

This paper presents a new methodology for hedging long-term financial derivatives written on an illiquid asset. The proposed hedging strategy combines dynamic trading of a correlated liquid asset (e.g. the market index) and static positions in market-traded options such as European puts and...

We discuss the valuation of credit derivatives in extreme regimes such as when the time-to-maturity is short, or when payoff is contingent upon a large number of defaults, as with senior tranches of collateralized debt obligations. In these cases, risk aversion may play an important role,...