Related papers: Recovery Swaps
In this chapter, we consider volatility swap, variance swap and VIX future pricing under different stochastic volatility models and jump diffusion models which are commonly used in financial market. We use convexity correction approximation…
In this paper we derive robust super- and subhedging dualities for contingent claims that can depend on several underlying assets. In addition to strict super- and subhedging, we also consider relaxed versions which, instead of eliminating…
This article presents a generic model for pricing financial derivatives subject to counterparty credit risk. Both unilateral and bilateral types of credit risks are considered. Our study shows that credit risk should be modeled as American…
In this paper, we consider heterogeneous distributed storage systems (DSSs) having flexible reconstruction degree, where each node in the system has dynamic repair bandwidth and dynamic storage capacity. In particular, a data collector can…
Caching is crucial for enabling high-throughput networks for data intensive applications. Traditional caching technology relies on DRAM, as it can transfer data at a high rate. However, DRAM capacity is subject to contention by most system…
We study computational problems in financial networks of banks connected by debt contracts and credit default swaps (CDSs). A main problem is to determine \emph{clearing} payments, for instance right after some banks have been exposed to a…
Abstract This paper proposes a novel approach to Bermudan swaption hedging by applying the deep hedging framework to address limitations of traditional arbitrage-free methods. Conventional methods assume ideal conditions, such as zero…
In recent years research on credit risk modelling has mainly focused on default probabilities. Recovery rates are usually modelled independently, quite often they are even assumed constant. Then, however, the structural connection between…
We empirically investigate the functional link between the variance swap rate and the spot variance. Using S\&P500 data over the period 2006-2018, we find overwhelming empirical evidence supporting the affine link analytically found by…
In this paper the zero vanna implied volatility approximation for the price of freshly minted volatility swaps is generalised to seasoned volatility swaps. We also derive how volatility swaps can be hedged using a strip of vanilla options…
We derive a general multivariate theory for realised characteristics of `model-free discretisation-invariant swaps', so-called because the standard no-arbitrage assumption of martingale forward prices is sufficient to derive fair-value swap…
In electricity markets, futures contracts typically function as a swap since they deliver the underlying over a period of time. In this paper, we introduce a market price for the delivery periods of electricity swaps, thereby opening an…
We introduce a novel class of credit risk models in which the drift of the survival process of a firm is a linear function of the factors. The prices of defaultable bonds and credit default swaps (CDS) are linear-rational in the factors.…
Siegel's paradox is a fundamental question in international finance about exchange rates for futures contracts and has puzzled many scholars for over forty years. The unorthodox approach presented in this article leads to an arbitrage-free…
We use granular regulatory data on euro interest rate swap trades between January 2021 and June 2023 to assess whether derivative positions of Italian banks can offset losses on their debt securities holdings should interest rates rise…
In this paper we present a rigorously motivated pricing equation for derivatives, including general cash collateralization schemes, which is consistent with quoted market bond prices. Traditionally, there have been differences in how…
This paper generalizes the framework for arbitrage-free valuation of bilateral counterparty risk to the case where collateral is included, with possible re-hypotecation. We analyze how the payout of claims is modified when collateral…
In this theoretical paper, I propose creation of a venture bank, able to multiply the capital of a venture capital firm by at least 47 times, without requiring access to the Federal Reserve or other central bank apart from settlement. This…
In this paper, we propose a new exogenous model to address the problem of negative interest rates that preserves the analytical tractability of the original Cox-Ingersoll-Ross (CIR) model with a perfect fit to the observed term-structure.…
We study how trading costs are reflected in equilibrium returns. To this end, we develop a tractable continuous-time risk-sharing model, where heterogeneous mean-variance investors trade subject to a quadratic transaction cost. The…