Standard delta hedging fails to exactly replicate a European call option in the presence of transaction costs. We study a pricing and hedging model similar to the delta hedging strategy with an endogenous volatility parameter for the calculation of delta over time. The endogenous volatility...

We use deep distributional reinforcement learning (RL) to develop hedging strategies for a trader responsible for derivatives dependent on a particular underlying asset. The transaction costs associated with trading the underlying asset are usually quite small. Traders therefore tend to carry...

We consider a trader who is responsible for managing a portfolio of derivatives that evolves stochastically and depends on a single underlying asset. We use reinforcement learning to develop a strategy for bringing options into the portfolio to manage gamma and vega risk. The options are subject...