Reinforcement learning for options on target volatility funds

@article{Daluiso2021ReinforcementLF,
  title={Reinforcement learning for options on target volatility funds},
  author={Roberto Daluiso and Emanuele Nastasi and Andrea Pallavicini and Stefano Polo},
  journal={ArXiv},
  year={2021},
  volume={abs/2112.01841}
}
In this work we deal with the funding costs rising from hedging the risky securities underlying a target volatility strategy (TVS), a portfolio of risky assets and a risk-free one dynamically rebalanced in order to keep the realized volatility of the portfolio on a certain level. The uncertainty in the TVS risky portfolio composition along with the difference in hedging costs for each component requires to solve a control problem to evaluate the option prices. We derive an analytical solution… 

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