Related papers: A Unified Framework for Pricing Credit and Equity …

We present a deep learning framework for pricing options based on market-implied volatility surfaces. Using end-of-day S\&P 500 index options quotes from 2018-2023, we construct arbitrage-free volatility surfaces and generate training data…

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…

This paper addresses a critical inconsistency in models of the term structure of interest rates (TSIR), where zero-coupon bonds are priced under risk-neutral measures distinct from those used in equity markets. We propose a unified TSIR…

Using spectral decomposition techniques and singular perturbation theory, we develop a systematic method to approximate the prices of a variety of options in a fast mean-reverting stochastic volatility setting. Four examples are provided in…

This paper introduces a novel stochastic model for credit spreads. The stochastic approach leverages the diffusion of default intensities via a CIR++ model and is formulated within a risk-neutral probability space. Our research primarily…

This paper studies the equal risk pricing (ERP) framework for the valuation of European financial derivatives. This option pricing approach is consistent with global trading strategies by setting the premium as the value such that the…

In the paper we study dynamics of the arbitrage prices of credit default swaps within a hazard process model of credit risk. We derive these dynamics without postulating that the immersion property is satisfied between some relevant…

We consider the problem of calculating risk-neutral implied volatilities of European options without relying on option mid prices but solely on bid and ask prices. We provide an approach, based on the conic finance paradigm, that allows to…

In this paper we present a theoretical framework for determining dynamic ask and bid prices of derivatives using the theory of dynamic coherent acceptability indices in discrete time. We prove a version of the First Fundamental Theorem of…

There are many studies on development of models for analyzing some derivatives such as credit default swaps .

We follow a long path for Credit Derivatives and Collateralized Debt Obligations (CDOs) in particular, from the introduction of the Gaussian copula model and the related implied correlations to the introduction of arbitrage-free dynamic…

Risk-averse investors often wish to exclude stocks from their portfolios that bear high credit risk, which is a measure of a firm's likelihood of bankruptcy. This risk is commonly estimated by constructing signals from quarterly accounting…

In this article, we study the problem of pricing defaultable bond with discrete default intensity and barrier under constant risk free short rate using higher order binary options and their integrals. In our credit risk model, the risk free…

Covered bonds are a specific example of senior secured debt. If the issuer of the bonds defaults the proceeds of the assets in the cover pool are used for their debt service. If in this situation the cover pool proceeds do not suffice for…

The process of liquidity provision in financial markets can result in prolonged exposure to illiquid instruments for market makers. In this case, where a proprietary position is not desired, pro-actively targeting the right client who is…

We model the dynamics of asset prices and associated derivatives by consideration of the dynamics of the conditional probability density process for the value of an asset at some specified time in the future. In the case where the price…

Volatility smile and skewness are two key properties of option prices that are represented by the implied volatility (IV) surface. However, IV surface calibration through nonlinear interpolation is a complex problem due to several factors,…

This paper studies the optimal timing to liquidate credit derivatives in a general intensity-based credit risk model under stochastic interest rate. We incorporate the potential price discrepancy between the market and investors, which is…

We introduce an equilibrium asset pricing model, which we build on the relationship between a novel risk measure, the Expected Downside Risk (EDR) and the expected return. On the one hand, our proposed risk measure uses a nonparametric…

In this paper incomplete-information models are developed for the pricing of securities in a stochastic interest rate setting. In particular we consider credit-risky assets that may include random recovery upon default. The market…