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...

This paper shows how reinforcement learning can be used to derive optimal hedging strategies for derivatives when there are transaction costs. The paper illustrates the approach by showing the difference between using delta hedging and optimal hedging for a short position in a call option when...

A common approach to valuing exotic options involves choosing a model and then determining its parameters to fit the volatility surface as closely as possible. We refer to this as the model calibration approach (MCA). A disadvantage of MCA is that some information in the volatility surface is...

We employ neural networks to understand volatility surface movements. We first use daily data on options on the S&P 500 index to derive a relationship between the expected change in implied volatility and three variables: the return on the index, the moneyness of the option, and the remaining...

The electrification of international shipping has gained attention from the global maritime industry in an effort to reduce pollution and greenhouse gas emissions. Despite rapidly falling battery prices and improvements in battery technologies, electric vehicles (both marine- and land-based...

This paper explores how the returns of country exchange traded funds (ETFs) respond to global risk factors in different market regimes. We consider the ETFs for the U.S., Canada, U.K., Germany, France, Italy, Japan, and Australia from May 30, 2000 to March 31, 2011. To answer this question, we...

The electrification of international shipping has gained attention from the global maritime industry in an effort to reduce pollution and greenhouse gas emissions. Despite rapidly falling battery prices and improvements in battery technologies, electric vehicles (both marine- and land-based...

As a kind of tourism activity mode integrating sports and modern leisure tourism, the competitiveness level of sports tourism has become one of the important indexes to measure the strength of its market competitiveness and the development level of local tourism industry. This paper uses entropy...

A feature of credit markets is the large difference between probabilities of default calculated from historical data and probabilities of default implied from bond prices (or from credit default swaps). This paper illustrates and discusses the reasons for the difference between historical and...