As hedge fund replication based on factor models has encountered growing interest among professionals and academics, and despite the launch of numerous products (indexes and mutual funds) in the past year, it faced many critics. In this paper, we consider three of the main critiques, namely the...

The paper develops an optimal control model to analyse various management options for infectious diseases that occur in metapopulations, under both Nash and cooperative behaviour. As pathogens are renewable resources with negative value, the problem may be non-convex. Since the disease can be...

Although portfolio management didn’t change much during the 40 years after the seminal works of Markowitz and Sharpe, the development of risk budgeting techniques marked an important milestone in the deepening of the relationship between risk and asset management. Risk parity then became a...

The book is divided into five parts. The essence of behavioural finance is presented in the first parts. Fuzzy generalizations of some mathematical concepts are presented in the second part. The impact of selected behavioural premises for imprecise estimation of expected return is described in...

Amid the controversies around the optimisation criteria and the objective functions when applying mathematical methods in economics, we proposed a method of quantifying a multi-criteria optimum, called critical distance method. The demonstration of this method is exemplified by assessing the...

The aim of this paper is to develop a hedging methodology for making a portfolio of options delta, vega and gamma neutral by taking positions in other available options, and simultaneously minimizing the net premium to be paid for the hedging. A quadratic programming solution for the problem is...

This paper proposes a methodology for active hedging Greeks of an option portfolio integrating churning and minimization of cost of hedging. In the first section, hedging strategy is implemented by taking positions in other available options, while simultaneously minimizing the net premium paid...

Conditional Value-at-Risk (CVaR) measures the expected loss amount beyond VaR. It has vast advantage over VaR because of its property of coherence. This paper gives an analytical solution in a complete market setting to the risk reward problem faced by a portfolio manager whose portfolio needs...

A model of bank’s dynamic asset management problem in case of partially observed future economic conditions and requirements concerning level of risk taken has been built. It requires solving the resulting optimal control with random terminal condition resulting from partial observation of...