Reinforcement learning for options on target volatility funds

  title={Reinforcement learning for options on target volatility funds},
  author={Roberto Daluiso and Emanuele Nastasi and Andrea Pallavicini and Stefano Polo},
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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