Pricing of Securities
Public announcement dates are used in the green bond literature to measure equity market reactions to upcoming green bond issues. We find a sizeable number of green bond announcements were pre-dated by anonymous information leakages on the…
It was demonstrated previously that the stochastic volatility emerges as the gauge field necessary for restoring the local symmetry under changes of the prices of the stocks inside the Black-Scholes (BS) equation. When this occurs, then a…
This paper studies an asset pricing model in a partially observable market with a large number of heterogeneous agents using the mean field game theory. In this model, we assume that investors can only observe stock prices and must infer…
Although the valuation of life contingent assets has been thoroughly investigated under the framework of mathematical statistics, little financial economics research pays attention to the pricing of these assets in a non-arbitrage, complete…
An important step in the Financial Benchmarks Reform was taken on 13th September 2018, when the ECB Working Group on Euro Risk-Free Rates recommended the Euro Short-Term Rate ESTR as the new benchmark rate for the euro area, to replace the…
In this paper, we introduce a novel pricing model for Uniswap V3, built upon stochastic processes and the Martingale Stopping Theorem. This model innovatively frames the valuation of positions within Uniswap V3. We further conduct a…
This paper investigates short-term behaviors of implied volatility of derivatives written on indexes in equity markets when the index processes are constructed by using a ranking procedure. Even in simple market settings where stock prices…
We introduce a pricing kernel with time-varying volatility risk aversion to explain observed time variations in the shape of the pricing kernel. When combined with the Heston-Nandi GARCH model, this framework yields a tractable option…
Valuation adjustments, collectively named XVA, play an important role in modern derivatives pricing to take into account additional price components such as counterparty and funding risk premia. They are an exotic price component carrying a…
This study presents a comparative analysis of Monte Carlo (MC) and quasi-Monte Carlo (QMC) methods in the context of derivative pricing, emphasizing convergence rates and the curse of dimensionality. After a concise overview of traditional…
The paper investigates the performance of the European option price when the log asset price follows a rich class of Generalized Tempered Stable (GTS) distribution. The GTS distribution is an alternative to Normal distribution and…
In this paper, we propose a novel methodology for pricing equity-indexed annuities featuring cliquet-style payoff structures and early surrender risk, using advanced financial modeling techniques. Specifically, the market is modeled by an…
We provide closed-form market equilibrium formula consolidating informational imperfections and investors beliefs. Based on Merton's model, we characterize the equilibrium expected excess returns vector with incomplete information. We then…
This paper investigates the pricing of financial derivatives and the calculation of their delta Greek when the underlying asset is a jump-diffusion process in which the stochastic intensity component follows the CIR process. Utilizing…
Local Volatility (LV) is a powerful tool for market modeling, enabling the generation of arbitrage-free scenarios calibrated to all European options. To implement LV, we need to interpolate and extrapolate option prices. This approach is…
This paper extends an option-theoretic approach to estimate liquidity spreads for corporate bonds. Inspired by Longstaff's equity market framework and subsequent work by Koziol and Sauerbier on risk-free zero-coupon bonds, the model views…
We propose a unifying framework for the pricing of debt securities under general time-inhomogeneous short-rate diffusion processes. The pricing of bonds, bond options, callable/putable bonds, and convertible bonds (CBs) is covered. Using…
The goal of this paper is to investigate how the marginal and dependence structures of a variety of multivariate L\'evy models affect calibration and pricing. To this aim, we study the approaches of Luciano and Semeraro (2010) and Ballotta…
Pricing composite and quanto contracts requires a joint model of both the underlying asset and the exchange rate. In this contribution, we explore the potential of local-correlation models to address the challenges of calibrating synthetic…
Geometric Asian options are a type of options where the payoff depends on the geometric mean of the underlying asset over a certain period of time. This paper is concerned with the pricing of such options for the class of Volterra-Heston…