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Article
Open AccessDuality in optimal consumption–investment problems with alternative data
This study investigates an optimal consumption–investment problem in which the unobserved stock trend is modulated by a hidden Markov chain that represents different economic regimes. In the classic approach, ...
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Article
Open AccessRobust Portfolio Optimization with Respect to Spectral Risk Measures Under Correlation Uncertainty
This paper proposes a distributionally robust multi-period portfolio model with ambiguity on asset correlations with fixed individual asset return mean and variance. The correlation matrix bounds can be quanti...
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Article
Robust Time-Inconsistent Stochastic Linear-Quadratic Control with Drift Disturbance
This paper studies stochastic linear-quadratic control with a time-inconsistent objective and worst-case drift disturbance. We allow the agent to introduce disturbances to reflect her uncertainty about the dri...
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Article
Mean–Variance Portfolio Selection Under Volterra Heston Model
Motivated by empirical evidence for rough volatility models, this paper investigates continuous-time mean–variance (MV) portfolio selection under the Volterra Heston model. Due to the non-Markovian and non-sem...
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Article
Robust state-dependent mean–variance portfolio selection: a closed-loop approach
This paper studies a class of robust mean–variance portfolio selection problems with state-dependent risk aversion. Model uncertainty, in the sense of considering alternative dominated models, is introduced to...
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Article
FFT-network for bivariate Lévy option pricing
We propose a two-dimensional fast Fourier transform (FFT) network to retrieve the prices of options that depend on two Lévy processes. Applications include, but are not limited to, the valuation of options on ...
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Article
Robust time-consistent mean–variance portfolio selection problem with multivariate stochastic volatility
This paper solves for the robust time-consistent mean–variance portfolio selection problem on multiple risky assets under a principle component stochastic volatility model. The model uncertainty is introduced ...
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Article
FFT network for interest rate derivatives with Lévy processes
This paper extends the fast Fourier transform (FFT) network to interest derivative valuation under the Hull–White model driven by a Lévy process. The classical trinomial tree for the Hull–White model is a wide...
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Article
Dual-curve Hull–White interest rate model with stochastic volatility
The sub-prime mortgage crisis of 2008 had a great effect on the financial market; it led to new market features and regulations. In particular, the dual curve feature has appeared in the over-the-counter marke...
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Article
VIX Forecast Under Different Volatility Specifications
Stochastic volatility (SV) models are theoretically more attractive than the GARCH type of models as it allows additional randomness. The classical SV models deduce a continuous probability distribution for vo...
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Chapter
Efficient Options Pricing Using the Fast Fourier Transform
We review the commonly used numerical algorithms for option pricing under Levy process via Fast Fourier transform (FFT) calculations. By treating option price analogous to a probability density function, optio...
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Article
Reduced-form Models with Regime Switching: An Empirical Analysis for Corporate Bonds
Empirical evidence shows that there is a close link between regime shifts and business cycle fluctuations. A standard term structure of interest rates, such as the Cox et al. (1985 Econometrica, 53, 385–407; CIR)...
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Article
Sub-Replication and Replenishing Premium: Efficient Pricing of Multi-State Lookbacks
The direct valuation procedure of performing discounted expectation to obtain the prices of multi-state lookback options may lead to insurmountable complexity and numerical difficulties. The computation may re...
