Pricing of Securities
In this paper is proposed a 2 factor structural PDE model of pricing puttable bond with credit risk and derived the analytical pricing formula. To this end, first, a 2 factor structural (PDE) model of pricing zero coupon bond with credit…
We propose a new methodology for pricing options on flow forwards by applying infinite-dimensional neural networks. We recast the pricing problem as an optimization problem in a Hilbert space of real-valued function on the positive real…
The aim of this paper is to present a dual-term structure model of interest rate derivatives in order to solve the two hardest problems in financial modeling: the exact volatility calibration of the entire swaption matrix, and the…
Exact relationships between the short time-to-maturity ATM implied volatility slope, the (dual) volatility swap, and the (dual) zero vanna implied volatility are given.
We develop the general integral transforms (GIT) method for pricing barrier options in the time-dependent Heston model (also with a time-dependent barrier) where the option price is represented in a semi-analytical form as a two-dimensional…
This paper presents a framework of imitating the principal investor's behavior for optimal pricing and hedging options. We construct a non-deterministic Markov decision process for modeling stock price change driven by the principal…
In practice, one must recognize the inevitable incompleteness of information while making decisions. In this paper, we consider the optimal redeeming problem of stock loans under a state of incomplete information presented by the…
A stock loan is a loan, secured by a stock, which gives the borrower the right to redeem the stock at any time before or on the loan maturity. The way of dividends distribution has a significant effect on the pricing of the stock loan and…
This research proposes a model for the intraday variation between the ETHBTC spot and the quotient of ETHUSDT and BTCUSDT traded on Binance. Under conditions of no-arbitrage, perfect accuracy and no microstructure effects, the variation…
This paper investigates how two important sources of risk -- market tail risk and extreme market volatility risk -- are priced into the cross-section of asset returns across various investment horizons. To identify such risks, we propose a…
Unihedge is a decentralized platform for prediction markets with a novel approach. Using Harberger Tax (HTAX) economic policies a new type of prediction market, named HTAX prediction market, was build. HTAX prediction market derivates from…
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…
This paper introduces an information-based model for the pricing of storable commodities such as crude oil and natural gas. The model uses the concept of market information about future supply and demand as a basis for valuation. Physical…
In this paper we propose a novel pricing-hedging framework for volatility derivatives which simultaneously takes into account rough volatility and volatility jumps. Our model directly targets the instantaneous variance of a risky asset and…
We are interested in the existence of equivalent martingale measures and the detection of arbitrage opportunities in markets where several multi-asset derivatives are traded simultaneously. More specifically, we consider a financial market…
In this paper we study both analytic and numerical solutions of option pricing equations using systems of orthogonal polynomials. Using a Galerkin-based method, we solve the parabolic partial diferential equation for the Black-Scholes model…
In this paper, we study the pricing of contracts in fixed income markets under volatility uncertainty in the sense of Knightian uncertainty or model uncertainty. The starting point is an arbitrage-free bond market under volatility…
Refundable income annuities (IA), such as cash-refund and instalment-refund, differ in material ways from the life-only version beloved by economists. In addition to lifetime income they guarantee the annuitant or beneficiary will receive…
In this paper is investigated the pricing problem of options on bonds with credit risk based on analysis on two kinds of solving problems for the Black-Scholes equations. First, a solution representation of the Black-Scholes equation with…
This paper considers the pricing of equity-linked life insurance contracts with death and survival benefits in a general model with multiple stochastic risk factors: interest rate, equity, volatility, unsystematic and systematic mortality.…