@article{lv_pang_xia_yan_2023, title={Dynamic portfolio choice with uncertain rare-events risk in stock and cryptocurrency markets}, volume={9}, ISSN={["2199-4730"]}, DOI={10.1186/s40854-023-00472-8}, abstractNote={Abstract In response to the unprecedented uncertain rare events of the last decade, we derive an optimal portfolio choice problem in a semi-closed form by integrating price diffusion ambiguity, volatility diffusion ambiguity, and jump ambiguity occurring in the traditional stock market and the cryptocurrency market into a single framework. We reach the following conclusions in both markets: first, price diffusion and jump ambiguity mainly determine detection-error probability; second, optimal choice is more significantly affected by price diffusion ambiguity than by jump ambiguity, and trivially affected by volatility diffusion ambiguity. In addition, investors tend to be more aggressive in a stable market than in a volatile one. Next, given a larger volatility jump size, investors tend to increase their portfolio during downward price jumps and decrease it during upward price jumps. Finally, the welfare loss caused by price diffusion ambiguity is more pronounced than that caused by jump ambiguity in an incomplete market. These findings enrich the extant literature on effects of ambiguity on the traditional stock market and the evolving cryptocurrency market. The results have implications for both investors and regulators.}, number={1}, journal={FINANCIAL INNOVATION}, author={Lv, Wujun and Pang, Tao and Xia, Xiaobao and Yan, Jingzhou}, year={2023}, month={Apr} }
@article{cong_pang_peng_2023, title={OPTIMAL STRATEGIES FOR GREEN SUPPLY CHAIN CONSIDERING SOCIAL RESPONSIBILITY AND ENVIRONMENTAL RESPONSIBILITY}, ISSN={["1553-166X"]}, DOI={10.3934/jimo.2023048}, abstractNote={In this paper, we investigate optimal strategies and the effects of Corporate Social Responsibility (CSR) and Corporate Environmental Responsibility (CER) for a green supply chain consisting of a single supplier and a single manufacturer. For two different power structures with four different CSR-CER awareness scenarios, we establish the Stackelberg game models to derive the optimal results on the greenness level, the production quantity, and the social welfare. The first finding is that the degree of CSR awareness or CER awareness of supply chain members has positive effects on the green strategy of the supplier. The second finding is that for any CSR-CER awareness scenario, the greenness level, the production quantity, and the social welfare typically are higher when the party without CSR awareness is the leader. The only exception is that the greenness level of raw materials is higher under the supplier-led than the manufacturer-led when the supplier's CSR awareness is lower under the supplier-led and the manufacturer's CER-aware model. The third finding is that under the supplier-led, the greenness level of raw materials is highest when the manufacturer is CSR-aware; while under the manufacturer-led, the greenness level of raw materials is highest when the supplier is both CSR-aware and CER-aware.}, journal={JOURNAL OF INDUSTRIAL AND MANAGEMENT OPTIMIZATION}, author={Cong, Jing and Pang, Tao and Peng, Hongjun}, year={2023}, month={Apr} }
@article{peng_sun_pang_2022, title={Optimal Strategies for A Dual-Channel Farming Supply Chain with Horizontal Competition and Cooperation}, ISSN={["1793-7019"]}, DOI={10.1142/S0217595922500154}, abstractNote={In this paper, we consider a dual-channel farming supply chain with two farmers and one distributor, where agriculture products produced by farmers have different quality levels. Farmers sell high-quality products to supermarkets and normal-quality products to small retail markets, respectively. Three scenarios are investigated: decentralized selling through the distributor to supermarkets (the DD mode); centralized selling through the distributor to supermarkets (the CD mode); centralized selling directly to supermarkets (the CS mode). Under the CS mode, farmers need to bear some extra sale cost such as inventory and transportation cost. We derive farmers’ optimal strategies of production effort and quality investment. It turns out that as farming scale expands, farmers’ production effort decreases, while quality investment increases. Moreover, two farmers’ quality investments are the highest under the CS mode and the least under the DD mode. Further analysis indicates that farmers’ total profits are generally the highest under the CS mode, but farmers obtain the highest profits under the CD mode if farmers’ extra sale cost under the CS mode exceeds a certain level. Therefore, to improve farmers’ welfare and agriculture products’ quality simultaneously, the CS mode may be the best choice in most cases, and it leads to a “win–win” situation for farmers and consumers.}, journal={ASIA-PACIFIC JOURNAL OF OPERATIONAL RESEARCH}, author={Peng, Hongjun and Sun, Wenting and Pang, Tao}, year={2022}, month={Apr} }
@article{shi_pang_peng_2022, title={Production and green technology investment strategy for contract-farming supply chain under yield insurance}, ISSN={["1476-9360"]}, DOI={10.1080/01605682.2022.2033141}, abstractNote={We consider a contract-farming supply chain with multiple farmers and an agro-dealer, where farmers are risk-averse and they invest in green technologies. To hedge the risk of yield uncertainty, farmers can purchase agricultural yield insurance. We build a Stackelberg game model to investigate the optimal decisions of farmers and the agro-dealer. The results show that agricultural competition, yield uncertainty, and farmers’ risk aversion have negative impacts on the farm size and the agrochemical reduction technology input, while the yield insurance has positive impacts. We also show that, for farmers with low initial agrochemical input, yield insurance can reduce the agrochemical inputs per acre, and the total agrochemical inputs despite that the farm size increases. Therefore, yield insurance can reduce agricultural pollution emissions. Despite the result of higher social welfare, more agricultural competition generates higher agricultural pollution emissions because farmers would have no incentive to invest more in green technologies. Furthermore, yield insurance enhances the social welfare if the environmental damage of agrochemicals is low. However, when the environmental damage of agrochemicals is high, the social welfare decreases under the yield insurance.}, journal={JOURNAL OF THE OPERATIONAL RESEARCH SOCIETY}, author={Shi, Ligang and Pang, Tao and Peng, Hongjun}, year={2022}, month={Feb} }
@article{pan_pang_zhao_2021, title={A simple and robust approach for expected shortfall estimation}, volume={25}, ISSN={["1755-2850"]}, DOI={10.21314/JCF.2021.003}, abstractNote={In risk management, estimating expected shortfall, though important and indispensable, is difficult when the sample size is small. This paper suggests a recipe for meeting such a challenge. A tail-based normal approximation with explicit formulas is derived by matching a specific quantile and the mean excess square of the sample observations. To enhance the estimation accuracy, we propose an adjusted tail-based normal approximation based on the sample's tail weight. The adjusted expected shortfall estimator is robust and efficient in the sense that it can be applied to various heavy-tailed distributions, such as Student t, lognormal, Gamma and Weibull, and the errors are all small. Moreover, compared with two common expected shortfall estimators -- the arithmetic average of excessive losses and extreme value theory estimator -- the proposed estimator achieves smaller mean squared errors for small samples, especially at high confidence levels. The properties of linear transformations on the expected shortfall estimator are also investigated to ensure its practicality.}, number={1}, journal={JOURNAL OF COMPUTATIONAL FINANCE}, author={Pan, Zhibin and Pang, Tao and Zhao, Yang}, year={2021}, month={Jun}, pages={77–107} }
@article{luo_pang_xu_2021, title={Forecasting US Yield Curve Using the Dynamic Nelson-Siegel Model with Random Level Shift Parameters}, volume={94}, ISSN={["1873-6122"]}, DOI={10.1016/j.econmod.2020.10.015}, abstractNote={In this paper, we develop a new model based on the classical dynamic Nelson-Siegel model by introducing random level shift (RLS) parameters. The built-in RLS can capture cyclical fluctuations in interest rates and structural breaks induced by technological progress, financial crisis, major monetary policy interventions, etc. In addition, the model can be used to forecast future structural breaks. We apply the model to fit and forecast daily U.S. Treasury yield curves and the model outperforms other widely used models. The empirical results show that the model not only has a better in-sample fit with residuals exhibiting less persistence but also has superior out-of-sample performance. Moreover, the model performs very well especially for short-term and long-term bonds, and the performance improves as the forecasting horizon increases.}, journal={ECONOMIC MODELLING}, author={Luo, Deqing and Pang, Tao and Xu, Jiawen}, year={2021}, month={Jan}, pages={340–350} }
@article{shi_pang_peng_2021, title={Optimal strategies for a capital constrained contract-farming supply chain with yield insurance}, volume={55}, ISSN={["2804-7303"]}, DOI={10.1051/ro/2021006}, abstractNote={We consider a capital-constrained contract-farming supply chain with a risk-averse farmer and a risk-neutral agro-dealer, where the farmer faces some yield uncertainty that can be covered by insurance. Using the Stackelberg model, we derive the optimal strategies on the insured level, production and wholesale price. The result shows that farmers with low risk aversion tend not to be insured, while those with high risk aversion tend to insure. Further analysis indicates that, as the degree of the farmer’s risk aversion increases, the farm size decreases, but the yield per unit area and the wholesale price of the agricultural product increases. In addition, yield insurance and premium subsidies can lead to a decrease of the yield per unit area. However, the expansion of the farm size can compensate for the inhibitory effect of the decrease of yield per unit area on the total yield, and thus the total yield increases. We also find that when the premium subsidy rate is low, the yield insurance’s value to farmers is negative. Moreover, the yield insurance’s value to farmers increases with respect to the bank’s interest rate.}, number={2}, journal={RAIRO-OPERATIONS RESEARCH}, author={Shi, Ligang and Pang, Tao and Peng, Hongjun}, year={2021}, month={Mar}, pages={521–544} }
@article{shi_pang_peng_2021, title={Optimal strategies of contract-farming supply chain under the cooperative mode of bank-insurance: loan guarantee insurance versus yield insurance}, ISSN={["1475-3995"]}, DOI={10.1111/itor.13051}, abstractNote={We investigate the impact of two insurance mechanisms: loan guarantee insurance and yield insurance, on a capital-constrained contract-farming supply chain where the farmer is risk-averse and faces yield uncertainty. Using the sequential model, we derive the farmer's optimal farm size, the agrodealer's optimal wholesale price and the insurance company's optimal premium rate. The result shows that under both insurance mechanisms, premium subsidies can promote the farmer to increase the farm size. However, we find that under loan guarantee insurance, when the premium subsidy is relatively high, the farmer's farm size increases with the poor harvest risk. Under yield insurance, the farmer's conditional value-at-risk (CVaR) value increases with respect to the premium subsidy rate. Under loan guarantee insurance, the premium rate increases with respect to the premium subsidy. As a result, the farmer's CVaR value decreases with respect to the premium subsidy rate when it is relatively high. Further analysis indicates that with the same government subsidy expenditure, the efficiency of premium subsidies to increase the farmer's production quantity is better under loan guarantee insurance mode, but the efficiency of premium subsidies to increase the farmer's CVaR value is better under yield insurance.}, journal={INTERNATIONAL TRANSACTIONS IN OPERATIONAL RESEARCH}, author={Shi, Ligang and Pang, Tao and Peng, Hongjun}, year={2021}, month={Aug} }
@article{fu_cao_pang_2020, title={A Sustainable Quantitative Stock Selection Strategy Based on Dynamic Factor Adjustment}, volume={12}, ISSN={["2071-1050"]}, DOI={10.3390/su12103978}, abstractNote={In this paper, we consider a sustainable quantitative stock selection strategy using some machine learning techniques. In particular, we use a random forest model to dynamically select factors for the training set in each period to ensure that the factors that can be selected in each period are the optimal factors in the current period. At the same time, the classification probability prediction (CPP) of stock returns is performed. Historical back-testing using Chinese stock market data shows that the proposed CPP quantitative stock selection strategy performs better than the traditional machine learning stock selection methods, and it can outperform the market index over the same period in most back-testing periods. Moreover, this strategy is sustainable in all market conditions, such as a bull market, a bear market, or a volatile market.}, number={10}, journal={SUSTAINABILITY}, author={Fu, Yi and Cao, Shuai and Pang, Tao}, year={2020}, month={May} }
@article{peng_pang_2020, title={FINANCING STRATEGIES FOR A CAPITAL-CONSTRAINED SUPPLIER UNDER YIELD UNCERTAINTY}, volume={16}, ISSN={["1553-166X"]}, DOI={10.3934/jimo.2018183}, abstractNote={We consider a supply chain consisting of a supplier and a distributor, in which the supplier has a capital constraint and faces productivity yield uncertainty. To solve the capital constraint problem, we propose an advance payment with risk compensation (APRC) mechanism, under which the distributor finances the supplier with an advance payment, and the supplier provides a price discount to compensate the distributor for the supplier's bankruptcy risk. The optimal solutions are derived under the APRC mechanism and the results indicate that under the APRC, the whole supply chain performs as well as if there is no capital constraint, in terms of profits and optimal strategies. Therefore, the APRC is an efficient solution for the supplier's capital constraint issue. In addition, when the deficit is big, the APRC provides an alternative financing arrangement and it can bring higher profits for both parties. Another very interesting finding is that, when the capital deficit is small, the supplier can do better with the bank loan financing, despite that a higher interest rate needs to be paid in this case.}, number={2}, journal={JOURNAL OF INDUSTRIAL AND MANAGEMENT OPTIMIZATION}, author={Peng, Hongjun and Pang, Tao}, year={2020}, month={Mar}, pages={887–909} }
@article{peng_pang_2020, title={Supply chain coordination under financial constraints and yield uncertainty}, volume={14}, ISSN={["1751-5262"]}, DOI={10.1504/EJIE.2020.112493}, abstractNote={A coordination problem for a supply chain with capital constraints and yield uncertainty is considered in this paper. In order to improve the supply chain, a buyback and risk sharing (BBRS) mechanism is proposed, in which the distributor shares the supplier's yield uncertainty risk by purchasing the overproduced products or waiving the shortage penalty, and the supplier shares the distributor's demand uncertainty risk by buying back the unsold products. The results indicate that, the profits and the strategies under the BBRS are the same with those under the centralised case. In addition, the proposed BBRS mechanism has a built-in mechanism to allocate the spillover profit between the supplier and the distributor. The results also show that the BBRS can increase the production quantity. Finally, we derive the bankruptcy probabilities for both the supplier and the distributor, and the probabilities depend on their initial capitals. [Received 4 August 2018; Accepted 18 January 2020]}, number={6}, journal={EUROPEAN JOURNAL OF INDUSTRIAL ENGINEERING}, author={Peng, Hongjun and Pang, Tao}, year={2020}, pages={782–812} }
@article{peng_pang_2019, title={A mutual-aid mechanism for supply chains with capital constraints}, volume={14}, ISSN={["1750-9661"]}, DOI={10.1080/17509653.2019.1578275}, abstractNote={We consider a supply chain in which both the supplier and the distributor experience capital constraints. Due to the capital constraints, the supplier faces a capital deficit during the production ...}, number={4}, journal={INTERNATIONAL JOURNAL OF MANAGEMENT SCIENCE AND ENGINEERING MANAGEMENT}, author={Peng, Hongjun and Pang, Tao}, year={2019}, pages={304–312} }
@article{peng_pang_2019, title={Optimal strategies for a three-level contract-farming supply chain with subsidy}, volume={216}, ISSN={["1873-7579"]}, DOI={10.1016/j.ijpe.2019.06.011}, abstractNote={Abstract We consider a three-level contract-farming supply chain with a risk-averse farmer, a risk-neutral supplier and a risk-neutral distributor, in which the farmer faces a yield uncertainty and the government offers agricultural subsidy to the farmer. The CVaR criterion is used to describe the risk-averse behavior of the farmer. We derive the optimal strategies of the supply chain and perform some sensitivity analysis to investigate the effects of the government subsidy and other factors. The results indicate that, as the subsidy increases, the farmer's total target production increases. Further analysis shows that the total production increase is mainly from the increased farm size, and the farmer's endeavor actually decreases. In addition, the results indicate that the profits of the supplier and the distributor both increase with respect to the subsidy. However, the impact of the subsidy on the farmer's profit depends on the farmer's degree of risk-averse. In particular, the impact of the subsidy to the farmer's profit tends to be positive for farmers with high degree of risk-averse, and the impact tends to be negative for those with low degree of risk-averse. The sensitivity analysis is also performed for the level of yield uncertainty in term of the standard deviation.}, journal={INTERNATIONAL JOURNAL OF PRODUCTION ECONOMICS}, author={Peng, Hongjun and Pang, Tao}, year={2019}, month={Oct}, pages={274–286} }
@article{pang_varga_2019, title={Portfolio Optimization for Assets with Stochastic Yields and Stochastic Volatility}, volume={182}, ISSN={["1573-2878"]}, DOI={10.1007/s10957-019-01513-y}, number={2}, journal={JOURNAL OF OPTIMIZATION THEORY AND APPLICATIONS}, author={Pang, Tao and Varga, Katherine}, year={2019}, month={Aug}, pages={691–729} }
@article{peng_pang_cao_zhao_2018, title={A Mutual Subsidy Mechanism for a Seasonal Product Supply Chain Channel Under Double Price Regulation}, volume={35}, ISSN={["1793-7019"]}, DOI={10.1142/S0217595918500471}, abstractNote={In this paper, we consider the decision-making and coordination mechanism of a seasonal product supply chain channel over a period consisting of a low season and a high season, where the price of the final product is strictly regulated, and the raw material is subject to a price cap regulation during the high season. The optimal decisions and profits under decentralized and centralized cases are derived for the low season and the high season. Our research indicates that, under the double price regulation, the manufacturer’s raw material order in the channel usually is not completely fulfilled during the high season and the order during the low season is usually small. Based on the results, we propose a mutual subsidy mechanism, in order to encourage the supplier to supply more raw material during the high season and to encourage the manufacturer to order more raw material during the low season.The theoretical results indicate that the mutual subsidy mechanism can effectively coordinate the seasonal product supply chain channel under the double price regulation, which is further verified by a numerical example. Moreover, the negotiation skills of the supplier and the manufacturer are also considered under the mutual subsidy mechanism, so that the spillover profit can be allocated on a win–win basis for both sides.}, number={6}, journal={ASIA-PACIFIC JOURNAL OF OPERATIONAL RESEARCH}, author={Peng, Hongjun and Pang, Tao and Cao, Fuliang and Zhao, Juan}, year={2018}, month={Dec} }
@article{pang_karan_2018, title={A closed-form solution of the Black-Litterman model with conditional value at risk}, volume={46}, ISSN={["1872-7468"]}, DOI={10.1016/j.orl.2017.11.014}, abstractNote={We consider a portfolio optimization problem of the Black–Litterman type, in which we use the conditional value-at-risk (CVaR) as the risk measure and we use the multi-variate elliptical distributions, instead of the multi-variate normal distribution, to model the financial asset returns. We propose an approximation algorithm and establish the convergence results. Based on the approximation algorithm, we derive a closed-form solution of the portfolio optimization problems of the Black–Litterman type with CVaR.}, number={1}, journal={OPERATIONS RESEARCH LETTERS}, author={Pang, Tao and Karan, Cagatay}, year={2018}, month={Jan}, pages={103–108} }
@article{peng_pang_cong_2018, title={Coordination contracts for a supply chain with yield uncertainty and low-carbon preference}, volume={205}, ISSN={["1879-1786"]}, DOI={10.1016/j.jclepro.2018.09.038}, abstractNote={We consider a supply chain consisting of a supplier and a manufacturer under the carbon emission cap-and-trade scheme, where the manufacturer faces yield uncertainty. A Stackelberg model is adopted to investigate the production, price and carbon emission reduction decisions for the decentralized and centralized supply chain. We analyze the popular quantity discount contract and the revenue sharing contract for the supply chain. Our results indicate that the quantity discount contract can efficiently coordinate the low-carbon supply chain, but the revenue-sharing contract cannot. We then design a new contract of revenue-sharing with subsidy on emission reduction (RSS) to coordinate the supply chain. We have showed that the proposed RSS contract can coordinate the low-carbon supply chain with yield uncertainty perfectly and the carbon emission reduction level can achieve the level under the centralized case.}, journal={JOURNAL OF CLEANER PRODUCTION}, author={Peng, Hongjun and Pang, Tao and Cong, Jing}, year={2018}, month={Dec}, pages={291–302} }
@article{pang_hussain_2017, title={A stochastic portfolio optimization model with complete memory}, volume={35}, ISSN={["1532-9356"]}, DOI={10.1080/07362994.2017.1299629}, abstractNote={ABSTRACTIn this article, we consider a portfolio optimization problem of the Merton’s type with complete memory over a finite time horizon. The problem is formulated as a stochastic control problem on a finite time horizon and the state evolves according to a process governed by a stochastic process with memory. The goal is to choose investment and consumption controls such that the total expected discounted utility is maximized. Under certain conditions, we derive the explicit solutions for the associated Hamilton–Jacobi–Bellman (HJB) equations in a finite-dimensional space for exponential, logarithmic, and power utility functions. For those utility functions, verification results are established to ensure that the solutions are equal to the value functions, and the optimal controls are also derived.}, number={4}, journal={STOCHASTIC ANALYSIS AND APPLICATIONS}, author={Pang, Tao and Hussain, Azmat}, year={2017}, pages={742–766} }
@article{pang_chen_li_2017, title={On the correlation and parametric approaches to calculation of credit value adjustment}, volume={11}, ISSN={["1753-9587"]}, DOI={10.21314/jrmv.2017.177}, abstractNote={Credit value adjustment (CVA) is an adjustment added to the fair value of an over-the-counter trade due to the risk of counterparty defaults. When the exposure to the counterparty and the counterparty default risk tend to change in the same direction, so-called wrong-way risk (WWR) must be taken into account. Right-way risk takes place when the two factors move in opposite directions. These two comovement effects are also called directional-way risk (DWR). Many efforts have been made to reduce the computational burden of calculating CVA with DWR. The two most popular approaches are the parametric approach and the correlation approach. In this paper, we develop a connection between these two approaches. In particular, by decomposing the DWR into a robust correlation coefficient and a profile multiplier, we bring the parametric approach into the correlation approach framework. This allows us to explain the parameters in the parametric approach. Our results suggest that the parametric approach can become sensitive when calculating the WWR in certain scenarios. For risk model governance and validation purposes, caution should be exercised when using the parametric approach for CVA calculation.}, number={3}, journal={JOURNAL OF RISK MODEL VALIDATION}, author={Pang, Tao and Chen, Wei and Li, Le}, year={2017}, month={Sep}, pages={49–67} }
@article{pang_hussain_2016, title={AN INFINITE TIME HORIZON PORTFOLIO OPTIMIZATION MODEL WITH DELAYS}, volume={6}, ISSN={["2156-8499"]}, DOI={10.3934/mcrf.2016018}, abstractNote={In this paper we consider a portfolio optimization problem of the Merton's type over an infinite time horizon. Unlike the classical Markov model, we consider a system with delays. The problem is formulated as a stochastic control problem on an infinite time horizon and the state evolves according to a process governed by a stochastic process with delay. The goal is to choose investment and consumption controls such that the total expected discounted utility is maximized. Under certain conditions, we derive the explicit solutions for the associated Hamilton-Jacobi-Bellman (HJB) equations in a finite dimensional space for logarithmic and power utility functions. For those utility functions, verification results are established to ensure that the solutions are equal to the value functions, and the optimal controls are derived, too.}, number={4}, journal={MATHEMATICAL CONTROL AND RELATED FIELDS}, author={Pang, Tao and Hussain, Azmat}, year={2016}, month={Dec}, pages={629–651} }
@article{wu_yao_pang_2016, title={An Empirical Analysis of the Impact of the Internet Finance on Money Market}, volume={38}, number={7}, journal={Contemporary Economic Management}, author={Wu, P. and Yao, Y. and Pang, T.}, year={2016}, pages={84–93} }
@article{liu_pang_2016, title={An efficient grid lattice algorithm for pricing American-style options}, volume={5}, ISSN={1756-7130 1756-7149}, url={http://dx.doi.org/10.1504/ijfmd.2016.076978}, DOI={10.1504/ijfmd.2016.076978}, abstractNote={Option pricing is an important area of research in the finance community. In this paper, we develop a computationally feasible and efficient lattice algorithm in pricing American-style options. The key idea is to build a time adjusted grid lattice model and afterwards implement backward induction to price options. The time adjusted grid lattice guarantees high accuracy in relatively few discrete finite nodes. To illustrate the performance of the lattice algorithm, European and American options are priced separately, and results are compared to other popular methods in terms of both accuracy and efficiency. All suggest that the proposed lattice algorithm does a better job. Moreover, the fast convergence behaviours of the lattice algorithm as well as the relationship between the converged option price and the number of determination dates are studied as well.}, number={1}, journal={International Journal of Financial Markets and Derivatives}, publisher={Inderscience Publishers}, author={Liu, Zhongkai and Pang, Tao}, year={2016}, pages={36} }
@inbook{pang_hussain_2015, title={An Application of Functional Ito's Formula to Stochastic Portfolio Optimization with Bounded Memory}, ISBN={9781611974072}, url={http://dx.doi.org/10.1137/1.9781611974072.23}, DOI={10.1137/1.9781611974072.23}, abstractNote={We consider a stochastic portfolio optimization model in which the returns of risky asset depend on its past performance. The price of the risky asset is described by a stochastic delay differential equation. The investor's goal is to maximize the expected discounted utility by choosing optimal investment and consumption as controls. We use the functional Ito's formula to derive the associated Hamilton-Jacobi-Bellman equation. For logarithmic and exponential utility functions, we can obtain explicit solutions in a finite dimensional space.}, booktitle={2015 Proceedings of the Conference on Control and its Applications}, publisher={Society for Industrial and Applied Mathematics}, author={Pang, Tao and Hussain, Azmat}, year={2015}, month={Jul}, pages={159–166} }
@article{pang_chen_li_2015, title={CVA Wrong Way Risk Multiplier Decomposition and Efficient CVA Curve}, volume={8}, number={4}, journal={Journal of Risk Management in Financial Institutions}, author={Pang, T. and Chen, W. and Li, L.}, year={2015}, pages={390–404} }
@article{pang_yang_zhao_2015, title={Convergence Studies on Monte Carlo Methods for Pricing Mortgage-Backed Securities}, volume={3}, ISSN={2227-7072}, url={http://dx.doi.org/10.3390/ijfs3020136}, DOI={10.3390/ijfs3020136}, abstractNote={Monte Carlo methods are widely-used simulation tools for market practitioners from trading to risk management. When pricing complex instruments, like mortgage-backed securities (MBS), strong path-dependency and high dimensionality make the Monte Carlo method the most suitable, if not the only, numerical method. In practice, while simulation processes in option-adjusted valuation can be relatively easy to implement, it is a well-known challenge that the convergence and the desired accuracy can only be achieved at the cost of lengthy computational times. In this paper, we study the convergence of Monte Carlo methods in calculating the option-adjusted spread (OAS), effective duration (DUR) and effective convexity (CNVX) of MBS instruments. We further define two new concepts, absolute convergence and relative convergence, and show that while the convergence of OAS requires thousands of simulation paths (absolute convergence), only hundreds of paths may be needed to obtain the desired accuracy for effective duration and effective convexity (relative convergence). These results suggest that practitioners can reduce the computational time substantially without sacrificing simulation accuracy.}, number={2}, journal={International Journal of Financial Studies}, publisher={MDPI AG}, author={Pang, Tao and Yang, Yipeng and Zhao, Dai}, year={2015}, month={May}, pages={136–150} }
@article{pang_yang_2015, title={GARCH Models for Credit Risk and Market Risk of Relative Returns}, volume={1}, number={1}, journal={Journal of Finance and Management Research}, author={Pang, T. and Yang, S.}, year={2015}, pages={19–38} }
@article{pang_varga_2015, title={Optimal Investment and Consumption for Portfolios with Stochastic Dividends}, volume={1}, number={2}, journal={Journal of Finance and Management Research}, author={Pang, T. and Varga, K.}, year={2015}, pages={1–22} }
@article{pang_2014, title={A Stochastic Investment Model on Finite Time Horizon}, volume={2}, number={1}, journal={Research on Finance and Management}, author={Pang, T.}, year={2014}, pages={1–26} }
@article{chang_pang_pemy_2012, title={Viscosity Solution of Optimal Stopping Problem for Stochastic Systems with Bounded Memory}, volume={30}, ISSN={["0736-2994"]}, DOI={10.1080/07362994.2012.727143}, abstractNote={We consider a finite time horizon optimal stopping problem for a system of stochastic functional differential equations with a bounded memory. Under some sufficiently smooth conditions, a Hamilton-Jacobi-Bellman (HJB) variational inequality for the value function is derived via dynamical programming principle. It is shown that the value function is the unique viscosity solution of the HJB variational inequality.}, number={6}, journal={STOCHASTIC ANALYSIS AND APPLICATIONS}, author={Chang, Mou-Hsiung and Pang, Tao and Pemy, Moustapha}, year={2012}, pages={1102–1135} }
@article{chang_pang_yang_2011, title={A Stochastic Portfolio Optimization Model with Bounded Memory}, volume={36}, ISSN={["1526-5471"]}, DOI={10.1287/moor.1110.0508}, abstractNote={This paper considers a portfolio management problem of Merton's type in which the risky asset return is related to the return history. The problem is modeled by a stochastic system with delay. The investor's goal is to choose the investment control as well as the consumption control to maximize his total expected, discounted utility. Under certain situations, we derive the explicit solutions in a finite dimensional space.}, number={4}, journal={MATHEMATICS OF OPERATIONS RESEARCH}, author={Chang, Mou-Hsiung and Pang, Tao and Yang, Yipeng}, year={2011}, month={Nov}, pages={604–619} }
@article{chang_pang_pemy_2010, title={An approximation scheme for Black-Scholes equations with delays}, volume={23}, ISSN={["1009-6124"]}, DOI={10.1007/s11424-010-0139-6}, number={3}, journal={JOURNAL OF SYSTEMS SCIENCE & COMPLEXITY}, author={Chang, Mou-Hsiung and Pang, Tao and Pemy, Moustapha}, year={2010}, month={Jun}, pages={438–455} }
@article{chang_pang_yong_2009, title={OPTIMAL STOPPING PROBLEM FOR STOCHASTIC DIFFERENTIAL EQUATIONS WITH RANDOM COEFFICIENTS}, volume={48}, ISSN={["1095-7138"]}, DOI={10.1137/070705726}, abstractNote={An optimal stopping problem for stochastic differential equations with random coefficients is considered. The dynamic programming principle leads to a Hamiltion-Jacobi-Bellman equation, which, for the current case, is a backward stochastic partial differential variational inequality (BSPDVI, for short) for the value function. Well-posedness of such a BSPDVI is established, and a verification theorem is proved.}, number={2}, journal={SIAM JOURNAL ON CONTROL AND OPTIMIZATION}, author={Chang, Mou-Hsiung and Pang, Tao and Yong, Jiongmin}, year={2009}, pages={941–971} }
@article{chang_pang_pemy_2008, title={Finite difference approximation for stochastic optimal stopping problems with delays}, volume={4}, DOI={10.3934/jimo.2008.4.227}, abstractNote={This paper considers the computational issue of the optimal stoppingproblem for the stochastic functional differential equation treatedin [6] The finite difference method developed by Barlesand Souganidis [3] is used to obtain a numerical approximationfor the viscosity solution of the infinite dimensionalHamilton-Jacobi-Bellman variational inequality (HJBVI) associatedwith the optimal stopping problem. The convergence results are thenestablished.}, number={2}, journal={Journal of Industrial and Management Optimization}, author={Chang, M. H. and Pang, T. and Pemy, M.}, year={2008}, pages={227–246} }
@article{chang_pang_pemy_2008, title={Finite difference approximations for stochastic control systems with delay}, volume={26}, ISSN={["0736-2994"]}, DOI={10.1080/07362990802006980}, abstractNote={Abstract This article considers the computation issues of the infinite dimensional HJB equation arising from the finite horizon optimal control problem of a general system of stochastic functional differential equations with a bounded memory treated in [2 Chang , M.H. , Pang , T. , and Pemy , M. accepted. Optimal control of functional stochastic differential equations with a bounded memory. Stochastics 80 ( 1 ): 69 – 96 . [Google Scholar]]. The finite difference scheme, using the result in [1 Barles , G. , and Souganidis , P.E. 1991 . Convergence of approximative schemes for fully nonlinear second order equations . J. Asymptotic Analysis 4 : 557 – 579 . [Google Scholar]], is obtained to approximate the viscosity solution of the infinite dimensional HJB equation. The convergence of the scheme is proved using the Banach fixed point theorem. The computational algorithm also is provided based on the scheme obtained.}, number={3}, journal={STOCHASTIC ANALYSIS AND APPLICATIONS}, author={Chang, Mou-Hsiung and Pang, Tao and Pemy, Moustapha}, year={2008}, pages={451–470} }
@article{chang_pang_pemy_2008, title={Optimal control of stochastic functional differential equations with a bounded memory}, volume={80}, ISSN={1744-2508 1744-2516}, url={http://dx.doi.org/10.1080/17442500701605494}, DOI={10.1080/17442500701605494}, abstractNote={This paper treats a finite time horizon optimal control problem in which the controlled state dynamics are governed by a general system of stochastic functional differential equations with a bounded memory. An infinite dimensional Hamilton–Jacobi–Bellman (HJB) equation is derived using a Bellman-type dynamic programming principle. It is shown that the value function is the unique viscosity solution of the HJB equation.}, number={1}, journal={Stochastics}, publisher={Informa UK Limited}, author={Chang, Mou-Hsiung (Harry) and Pang, Tao and Pemy, Moustapha}, year={2008}, month={Feb}, pages={69–96} }
@article{chang_pang_pemy_2006, title={Stochastic optimal control problems with a bounded memory}, volume={6}, journal={Operations Research and Its Applications, Lecture Notes in Operations Research}, author={Chang, M.-H. and Pang, T. and Pemy, Moustapha}, year={2006}, pages={82–94} }
@article{pang_2006, title={Stochastic portfolio optimization with log utility}, volume={9}, ISSN={0219-0249 1793-6322}, url={http://dx.doi.org/10.1142/s0219024906003858}, DOI={10.1142/s0219024906003858}, abstractNote={A portfolio optimization problem on an infinite time horizon is considered. Risky asset price obeys a logarithmic Brownian motion, and the interest rate varies according to an ergodic Markov diffusion process. Moreover, the interest rate fluctuation is correlated with the risky asset price fluctuation. The goal is to choose optimal investment and consumption policies to maximize the infinite horizon expected discounted log utility of consumption. A dynamic programming principle is used to derive the dynamic programming equation (DPE). The explicit solutions for optimal consumption and investment control policies are obtained. In addition, for a special case, an explicit formula for the value function is given.}, number={6}, journal={International Journal of Theoretical and Applied Finance}, publisher={World Scientific Publishing Company}, author={Pang, Tao}, year={2006}, pages={869–887} }
@article{fleming_pang_2005, title={A stochastic control model of investment, production and consumption}, volume={63}, DOI={10.1090/s0033-569x-04-00941-1}, abstractNote={We consider a stochastic control model in which an economic unit has productive capital and also liabilities in the form of debt. The worth of capital changes over time through investment as well as through random Brownian fluctuations in the unit price of capital. Income from production is also subject to random Brownian fluctuations. The goal is to choose investment and consumption controls which maximize total expected discounted HARA utility of consumption. Optimal control policies are found using the method of dynamic programming. In case of logarithmic utility, these policies have explicit forms.}, number={1}, journal={Quarterly of Applied Mathematics}, author={Fleming, W. H. and Pang, T.}, year={2005}, pages={71–87} }
@article{fleming_pang_2004, title={An application of stochastic control theory to financial economics}, volume={43}, ISSN={["1095-7138"]}, DOI={10.1137/S0363012902419060}, abstractNote={We consider a portfolio optimization problem which is formulated as a stochastic control problem. Risky asset prices obey a logarithmic Brownian motion, and interest rates vary according to an ergodic Markov diffusion process. The goal is to choose optimal investment and consumption policies to maximize the infinite horizon expected discounted hyperbolic absolute risk aversion (HARA) utility of consumption. A dynamic programming principle is used to derive the dynamic programming equation (DPE). The subsolution--supersolution method is used to obtain existence of solutions of the DPE. The solutions are then used to derive the optimal investment and consumption policies.}, number={2}, journal={SIAM JOURNAL ON CONTROL AND OPTIMIZATION}, author={Fleming, WH and Pang, T}, year={2004}, pages={502–531} }
@article{pang_2004, title={Portfolio optimization models on infinite-time horizon}, volume={122}, ISSN={["1573-2878"]}, DOI={10.1023/B:JOTA.0000042596.26927.2d}, number={3}, journal={JOURNAL OF OPTIMIZATION THEORY AND APPLICATIONS}, author={Pang, T}, year={2004}, month={Sep}, pages={573–597} }
@article{pang_1999, title={Global Smooth Solutions and Large Time Behavior of the One-Dimensional Navier–Stokes Equations}, volume={235}, ISSN={0022-247X}, url={http://dx.doi.org/10.1006/jmaa.1999.6287}, DOI={10.1006/jmaa.1999.6287}, abstractNote={The system of balance laws of mass, momentum and energy for a viscous, heat-conductive, one-dimensional real gas (Navier-Stokes equations) is considered. The existence of globally defined smooth solution to an initial boundary value problem is established. Because of the boundary conditions' effect, vacuum will be developed as time tends to infinity.}, number={2}, journal={Journal of Mathematical Analysis and Applications}, publisher={Elsevier BV}, author={Pang, Tao}, year={1999}, month={Jul}, pages={395–417} }