{"title":"随机控制的凸序:摆动合约案例","authors":"Gilles Pagès, Christian Yeo","doi":"arxiv-2406.07464","DOIUrl":null,"url":null,"abstract":"We investigate propagation of convexity and convex ordering on a typical\nstochastic optimal control problem, namely the pricing of\n\\q{\\emph{Take-or-Pay}} swing option, a financial derivative product commonly\ntraded on energy markets. The dynamics of the underlying asset is modelled by\nan \\emph{ARCH} model with convex coefficients. We prove that the value function\nassociated to the stochastic optimal control problem is a convex function of\nthe underlying asset price. We also introduce a domination criterion offering\ninsights into the monotonicity of the value function with respect to parameters\nof the underlying \\emph{ARCH} coefficients. We particularly focus on the\none-dimensional setting where, by means of Stein's formula and regularization\ntechniques, we show that the convexity assumption for the \\emph{ARCH}\ncoefficients can be relaxed with a semi-convexity assumption. To validate the\nresults presented in this paper, we also conduct numerical illustrations.","PeriodicalId":501084,"journal":{"name":"arXiv - QuantFin - Mathematical Finance","volume":"10 1","pages":""},"PeriodicalIF":0.0000,"publicationDate":"2024-06-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":"{\"title\":\"Convex ordering for stochastic control: the swing contracts case\",\"authors\":\"Gilles Pagès, Christian Yeo\",\"doi\":\"arxiv-2406.07464\",\"DOIUrl\":null,\"url\":null,\"abstract\":\"We investigate propagation of convexity and convex ordering on a typical\\nstochastic optimal control problem, namely the pricing of\\n\\\\q{\\\\emph{Take-or-Pay}} swing option, a financial derivative product commonly\\ntraded on energy markets. The dynamics of the underlying asset is modelled by\\nan \\\\emph{ARCH} model with convex coefficients. We prove that the value function\\nassociated to the stochastic optimal control problem is a convex function of\\nthe underlying asset price. We also introduce a domination criterion offering\\ninsights into the monotonicity of the value function with respect to parameters\\nof the underlying \\\\emph{ARCH} coefficients. We particularly focus on the\\none-dimensional setting where, by means of Stein's formula and regularization\\ntechniques, we show that the convexity assumption for the \\\\emph{ARCH}\\ncoefficients can be relaxed with a semi-convexity assumption. To validate the\\nresults presented in this paper, we also conduct numerical illustrations.\",\"PeriodicalId\":501084,\"journal\":{\"name\":\"arXiv - QuantFin - Mathematical Finance\",\"volume\":\"10 1\",\"pages\":\"\"},\"PeriodicalIF\":0.0000,\"publicationDate\":\"2024-06-11\",\"publicationTypes\":\"Journal Article\",\"fieldsOfStudy\":null,\"isOpenAccess\":false,\"openAccessPdf\":\"\",\"citationCount\":\"0\",\"resultStr\":null,\"platform\":\"Semanticscholar\",\"paperid\":null,\"PeriodicalName\":\"arXiv - QuantFin - Mathematical Finance\",\"FirstCategoryId\":\"1085\",\"ListUrlMain\":\"https://doi.org/arxiv-2406.07464\",\"RegionNum\":0,\"RegionCategory\":null,\"ArticlePicture\":[],\"TitleCN\":null,\"AbstractTextCN\":null,\"PMCID\":null,\"EPubDate\":\"\",\"PubModel\":\"\",\"JCR\":\"\",\"JCRName\":\"\",\"Score\":null,\"Total\":0}","platform":"Semanticscholar","paperid":null,"PeriodicalName":"arXiv - QuantFin - Mathematical Finance","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/arxiv-2406.07464","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"","JCRName":"","Score":null,"Total":0}
Convex ordering for stochastic control: the swing contracts case
We investigate propagation of convexity and convex ordering on a typical
stochastic optimal control problem, namely the pricing of
\q{\emph{Take-or-Pay}} swing option, a financial derivative product commonly
traded on energy markets. The dynamics of the underlying asset is modelled by
an \emph{ARCH} model with convex coefficients. We prove that the value function
associated to the stochastic optimal control problem is a convex function of
the underlying asset price. We also introduce a domination criterion offering
insights into the monotonicity of the value function with respect to parameters
of the underlying \emph{ARCH} coefficients. We particularly focus on the
one-dimensional setting where, by means of Stein's formula and regularization
techniques, we show that the convexity assumption for the \emph{ARCH}
coefficients can be relaxed with a semi-convexity assumption. To validate the
results presented in this paper, we also conduct numerical illustrations.