A locally-built, LLM-digested index of recent arXiv papers in quant finance, geometry/topology, and statistical ML — keyword search served straight from SQLite on this machine.
Perfect hedging strategies found in rough Heston models.
The paper explores neural networks for improving delta hedging in financial markets.
Modeling market impacts leads to perfect hedging strategies.
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 valuation of multiple exercise options via classical hedging arguments. Introducing t…
New method for hedging path-dependent options with price impact using probabilistic arguments.
We consider a financial model with permanent price impact. Continuous time trading dynamics are derived as the limit of discrete rebalancing policies. We then study the problem of super-hedging a European option. Our main result is the derivation of a quasi-linear pricing equation. It holds in the sense of viscosity so…
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 hedging for European call option was considered in the standard Black-Scholes m…
We use a simple agent based model of value investors in financial markets to test three credit regulation policies. The first is the unregulated case, which only imposes limits on maximum leverage. The second is Basle II and the third is a hypothetical alternative in which banks perfectly hedge all of their leverage-in…
Perfect hedging of options with a dynamic portfolio in rough volatility models.
Optimal hedging strategy found in markets with incomplete pricing kernels.
We consider the problem of option hedging in a market with proportional transaction costs. Since super-replication is very costly in such markets, we replace perfect hedging with an expected loss constraint. Asymptotic analysis for small transactions is used to obtain a tractable model. A general expansion theory is de…
This paper presents hedging strategies for European and exotic options in a Levy market. By applying Taylor's Theorem, dynamic hedging portfolios are con- structed under different market assumptions, such as the existence of power jump assets or moment swaps. In the case of European options or baskets of European optio…
This work addresses the problem of optimal pricing and hedging of a European option on an illiquid asset Z using two proxies: a liquid asset S and a liquid European option on another liquid asset Y. We assume that the S-hedge is dynamic while the Y-hedge is static. Using the indifference pricing approach we derive a HJ…
Optimal hedging strategies identified for markets with fast-varying volatility.
We consider a financial market with liquidity cost as in Çetin, Jarrow and Protter [2004], where the supply function depends on a parameter with corresponding to the perfect liquid situation. Using the PDE characterization of Çetin, Soner and Touzi [2010] of the super-hedging cost of a…
Paper proposes a deep hedging method for Bermudan swaptions to manage residual profit and loss.
This paper formulates a model of utility for a continuous time framework that captures the decision-maker's concern with ambiguity about both volatility and drift. Corresponding extensions of some basic results in asset pricing theory are presented. First, we derive arbitrage-free pricing rules based on hedging argumen…
In this work we study the price-hedge issue for general defaultable contracts characterized by the presence of a contingent CSA of switching type. This is a contingent risk mitigation mechanism that allow the counterparties of a defaultable contract to switch from zero to full/perfect collateralization and switch back …
The paper studies the concepts of hedging and arbitrage in a non probabilistic framework. It provides conditions for non probabilistic arbitrage based on the topological structure of the trajectory space and makes connections with the usual notion of arbitrage. Several examples illustrate the non probabilistic arbitrag…
We construct a binomial model for a guaranteed minimum withdrawal benefit (GMWB) rider to a variable annuity (VA) under optimal policyholder behaviour. The binomial model results in explicitly formulated perfect hedging strategies funded using only periodic fee income. We consider the separate perspectives of the insur…
Paper calculates Greeks and risk-neutral density for CEV model options.
Financial markets have developed a lot of strategies to control risks induced by market fluctuations. Mathematics has emerged as the leading discipline to address fundamental questions in finance as asset pricing model and hedging strategies. History began with the paradigm of zero-risk introduced by Black & Scholes st…
The paper analyzes insurance risks using stochastic models.
The Local Volatility model is a well-known extension of the Black-Scholes constant volatility model whereby the volatility is dependent on both time and the underlying asset. This model can be calibrated to provide a perfect fit to a wide range of implied volatility surfaces. The model is easy to calibrate and still ve…
The paper develops a new class of financial market models. These models are based on generalized telegraph processes: Markov random flows with alternating velocities and jumps occurring when the velocities are switching. While such markets may admit an arbitrage opportunity, the model under consideration is arbitrage-f…
New algorithm reduces online learning regret for bounded recall games.
Optimal strategies identified for unit linked life insurance contracts in a jump-diffusion model.
Investor optimizes portfolio under dynamic risk preferences.
Funding is a cost to trading desks that they see as an input. Current FVA-related literature reflects this by also taking funding costs as an input, usually constant, and always risk-neutral. However, this funding curve is the output from a Treasury point of view. Treasury must consider Regulatory-required liquidity bu…
I study the limit of a large random economy, where a set of consumers invests in financial instruments engineered by banks, in order to optimize their future consumption. This exercise shows that, even in the ideal case of perfect competition, where full information is available to all market participants, the equilibr…
New set type with no uniformly perfect subsets.
Model investor risk preferences to adjust real option valuation.
The study examines perfect fluid spacetimes and their properties.
In his seminal 1951 paper "Extreme forms" Coxeter \cite{cox51} observed that for one can add vectors to the perfect lattice $\sfA_9$ so that the resulting perfect lattice, called $\sfA_9^2$ by Coxeter, has exactly the same set of minimal vectors. An inhomogeneous analog of the notion of perfect lattice is tha…
The study examines properties of perfect fluid spacetimes in Einstein's theory.
The paper studies Ricci solitons in perfect fluid spacetimes with specific vector fields.
Algorithm decides if pseudo-Anosov flows have perfect fits.
Paper proves a rigidity result for static perfect fluids.
Paper uses RL for dynamic swaption hedging, outperforming traditional methods.
Paper introduces -Perfect to estimate model-human correlation in subjective datasets.
The notion of a locally continuously perfect group is introduced and studied. This notion generalizes locally smoothly perfect groups introduced by Haller and Teichmann. Next, we prove that the path connected identity component of the group of all homeomorphisms of a manifold is locally continuously perfect. The case o…
Study develops efficient nested deep hedging method for derivatives pricing.
Paper proves almost all Gaussian graphical models are perfect.
Neural-SDE models improve option hedging with lower errors and robustness.
Study tests if deep hedging differs from delta hedging in a GARCH market model.
New cohomology theory for planar graphs with perfect matchings.
Paper proposes a natural hedging framework with graphical assessment for longevity risk management.
Researchers study solitons in perfect fluid spacetime geometry.