Related papers: Deterministic definition of the capital risk

The classical problem of optimal transportation can be formulated as a linear optimization problem on a convex domain: among all joint measures with fixed marginals find the optimal one, where optimality is measured against a cost function.…

We consider the valuation of contingent claims with delayed dynamics in a Black&Scholes complete market model. We find a pricing formula that can be decomposed into terms reflecting the market values of the past and the present, showing how…

We review recent progress in modeling credit risk for correlated assets. We start from the Merton model which default events and losses are derived from the asset values at maturity. To estimate the time development of the asset values, the…

The duality between the robust (or equivalently, model independent) hedging of path dependent European options and a martingale optimal transport problem is proved. The financial market is modeled through a risky asset whose price is only…

For each of (i) arbitrary stochastic reset, (ii) deterministic reset with arbitrary period, (iii) reset at arbitrary constant rate, and then in the sense of either (a) first-order stochastic dominance or (b) expectation (i.e. for each of…

Foundation models - already transformative in domains such as natural language processing - are now starting to emerge for time-series tasks in finance. While these pretrained architectures promise versatile predictive signals, little is…

We study an optimal investment problem under default risk where related information such as loss or recovery at default is considered as an exogenous random mark added at default time. Two types of agents who have different levels of…

We generalize the classical probability frame by adopting a wider family of random variables that includes nondeterministic ones. The frame that emerges is known to host a ''classical'' extension of quantum mechanics. We discuss the notion…

We set up a structural model to study credit risk for a portfolio containing several or many credit contracts. The model is based on a jump--diffusion process for the risk factors, i.e. for the company assets. We also include correlations…

The kinematics and dynamics of deterministic physical systems have been a foundation of our understanding of the world since Galileo and Newton. For real systems, however, uncertainty is largely present via external forces such as friction…

This paper addresses the question of how Brownian-like motion can arise from the solution of a deterministic differential delay equation. To study this we analytically study the bifurcation properties of an apparently simple differential…

We consider a market with a term structure of credit risky bonds in the single-name case. We aim at minimal assumptions extending existing results in this direction: first, the random field of forward rates is driven by a general…

Motivated by the interplay between structural and reduced form credit models, we propose to model the firm value process as a time-changed Brownian motion that may include jumps and stochastic volatility effects, and to study the first…

Evolutionary game theory is a powerful mathematical framework to study how intelligent individuals adjust their strategies in collective interactions. It has been widely believed that it is impossible to unilaterally control players'…

Factor modeling of asset returns has been a dominant practice in investment science since the introduction of the Capital Asset Pricing Model (CAPM) and the Arbitrage Pricing Theory (APT). The factors, which account for the systematic risk,…

We consider a piecewise deterministic Markov decision process, where the expected exponential utility of total (nonnegative) cost is to be minimized. The cost rate, transition rate and post-jump distributions are under control. The state…

We consider an economic agent (a household or an insurance company) modelling its surplus process by a deterministic process or by a Brownian motion with drift. The goal is to maximise the expected discounted spendings/dividend payments,…

We construct a continuous time model for price-mediated contagion precipitated by a common exogenous stress to the banking book of all firms in the financial system. In this setting, firms are constrained so as to satisfy a risk-weight…

We deal with the convergence of the value function of an approximate control problem with uncertain dynamics to the value function of a nonlinear optimal control problem. The assumptions on the dynamics and the costs are rather general and…

We prove that deterministic motion in dissipative systems emerges as a strict geometric attractor of contact flow, not a statistical approximation. Building on the contact geometry of stochastic vector bundles, we develop time-dependent…