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We solve the problem of mean-variance hedging for general semimartingale models via stochastic control methods. After … be used to describe the optimal trading strategy for each conditional mean-variance hedging problem. For comparison with …. mean-variance hedging ; stochastic control ; backward stochastic differential equations ; semimartingales ; mathematical …
Persistent link: https://www.econbiz.de/10009558490
The duality between the robust (or equivalently, model independent) hedging of path dependent European options and a … martingale optimal transport problem is proved. The financial market is modeled through a risky asset whose price is only assumed … to be a continuous function of time. The hedging problem is to construct a minimal super-hedging portfolio that consists …
Persistent link: https://www.econbiz.de/10009750641
obtained through martingale transport. The considered call option prices and their associated marginal distributions do not …
Persistent link: https://www.econbiz.de/10012836487
Investors often control risk exposure by trading options. This article studies the optimal strategy for liquidating an option position. Under both complete and incomplete market settings, we quantify the value of optimally timing to liquidate, and identify the situations where it is optimal to...
Persistent link: https://www.econbiz.de/10013014538
We solve the problems of mean-variance hedging (MVH) and mean-variance portfolio selection (MVPS) under restricted …-information filtration and assume that S is a time-dependent affine transformation of a square-integrable martingale. This class of processes …
Persistent link: https://www.econbiz.de/10011865489
We consider a consumption-investment optimization problem for the Kabanov model when the proportional transaction costs rate is constant and the prices are modeled by a Lévy process. We naturally extend the preliminary work of [4] to portfolio processes that are only supposed to be làdlàg....
Persistent link: https://www.econbiz.de/10013034994
We consider second, third, fourth and fifth order stochastic dominance (SSD, TSD, FOSD and FISD, respectively) as well as decreasing absolute risk aversion (DARA) stochastic dominance (DSD). For comparison with DSD we also consider stochastic dominance (ESD) based on CARA utility functions....
Persistent link: https://www.econbiz.de/10012928166
This paper is concerned with an investor trading in multiple securities over many time periods in order to meet an outstanding liability at some future date. The investor is concerned with maximizing the expected profits from portfolio rebalancing under an initial wealth restriction to meet the...
Persistent link: https://www.econbiz.de/10013230031
as an indispensable 'technical' hypothesis in previous papers on hedging (super-replication) of contingent claims under …
Persistent link: https://www.econbiz.de/10013107809
In this short note, we consider mean-variance optimized portfolios with transaction costs. We show that introducing quadratic transaction costs makes the optimization problem more difficult than using linear transaction costs. The reason lies in the specification of the budget constraint, which...
Persistent link: https://www.econbiz.de/10014031680