Customizing the optimal derivative written on an “instrument” risk to hedge an exogenous pecuniary risk is only examined in a few works assuming specific objective function and/or distribution of the risks. We show that this problem is closely-related to a previously un-examined...

Banks must manage their trading books, not just value them. Pricing includes valuation adjustments collectively known as XVA (at least credit, funding, capital and tax), so management must also include XVA. In trading book management we focus on pricing, hedging, and allocation of prices or...

This paper extends the project initiated in and studies a lifecycle portfolio choice problem with borrowing constraints and finite retirement time in which an agent receives labor income that adjusts to financial market shocks in a path dependent way. The novelty here, with respect to, is the...

We derive utility maximizing portfolios and consumption rates in electricity futures markets under anticipative information modeled by enlarged filtrations. The emerging optimization exercises are solved by point-wise maximization and a sufficient stochastic maximum principle. We provide...

We present a robust version of the life-cycle optimal portfolio choice problem in the presence of labor income, as introduced in Biffis, Gozzi and Prosdocimi and Dybvig and Liu. In particular, in the influence of past wages on the future ones is modelled linearly in the evolution equation of...

In a complete financial market every contingent claim can be hedged perfectly. In an incomplete market it is possible to stay on the safe side by superhedging. But such strategies may require a large amount of initial capital. Here we study the question what an investor can do who is unwilling...

We develop a trading strategy which employs limit and market orders in a multi-asset economy where the assets are not only correlated, but can also be structurally dependent. To model the structural dependence, the midprice processes follow a multivariate reflected Brownian motion on the closure...