Dynamic option hedging via stochastic model predictive control based on scenario simulation

DOI10.1080/14697688.2011.649780zbMath1402.91754OpenAlexW2045027527MaRDI QIDQ5247231

Tommaso Gabbriellini, Leonardo Bellucci, Alberto Bemporad

Publication date: 23 April 2015

Published in: Quantitative Finance (Search for Journal in Brave)

Full work available at URL: https://doi.org/10.1080/14697688.2011.649780

zbMATH Keywords

stochastic programmingdynamical systemsstochastic controlexotic optionsfinancial optionshedging techniques

Mathematics Subject Classification ID

Stochastic programming (90C15) Optimal stochastic control (93E20) Derivative securities (option pricing, hedging, etc.) (91G20)

Related Items (4)

Model predictive control for optimal pairs trading portfolio with gross exposure and transaction cost constraints ⋮ Multi-period portfolio selection with drawdown control ⋮ Competitive equilibriums and social shaping for multi-agent systems ⋮ Model predictive control design for constrained Markov jump bilinear stochastic systems with an application in finance

Uses Software

• Matlab
• Model Predictive Control Toolbox

Cites Work

• The Pricing of Options and Corporate Liabilities
• Generating Scenario Trees for Multistage Decision Problems
• Stochastic MPC with inequality stability constraints
• Hedging options under transaction costs and stochastic volatility
• Hedged Monte-Carlo: low variance derivative pricing with objective probabilities
• Financial Asset-Pricing Theory and Stochastic Programming Models for Asset/Liability Management: A Synthesis
• A Theory of the Term Structure of Interest Rates
• Comment on “Generating Scenario Trees for Multistage Decision Problems”
• Dynamic hedging of single and multi-dimensional options with transaction costs: a generalized utility maximization approach
• Robust, Optimal Predictive Control of Jump Markov Linear Systems Using Particles
• Hedging Derivative Securities and Incomplete Markets: An ε-Arbitrage Approach
• Dynamic hedging of basket options under proportional transaction costs using receding horizon control
• Stochastic Receding Horizon Control of Constrained Linear Systems With State and Control Multiplicative Noise
• A Closed-Form Solution for Options with Stochastic Volatility with Applications to Bond and Currency Options
• Valuing American Options by Simulation: A Simple Least-Squares Approach
• The explicit linear quadratic regulator for constrained systems

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