Related papers: Security Pricing with Information-Sensitive Discou…
We discuss the pricing methodology for Bonus Certificates and Barrier Reverse-Convertible Structured Products. Pricing for a European barrier condition is straightforward for products of both types and depends on an efficient interpolation…
In this paper, we propose an equilibrium pricing model in a dynamic multi-period stochastic framework with uncertain income streams. In an incomplete market, there exist two traded risky assets (e.g. stock/commodity and weather derivative)…
Evaluating the financial performance of manufacturing firms requires consideration of both the time value of money and the relative importance of multiple decision criteria. Conventional approaches relying solely on deterministic…
A model is proposed for Bitcoin prices that takes into account market attention. Market attention, modeled by a mean-reverting Cox-Ingersoll-Ross processes, affects the volatility of Bitcoin returns, with some delay. The model is affine and…
We consider the pricing and hedging of exotic options in a model-independent set-up using \emph{shortfall risk and quantiles}. We assume that the marginal distributions at certain times are given. This is tantamount to calibrating the model…
The objective of this paper is to explore how financial big data and machine learning methods can be applied to model and understand financial products. We focus on residential mortgage backed securities, resMBS, which were at the heart of…
The valuation process that economic agents undergo for investments with uncertain payoff typically depends on their statistical views on possible future outcomes, their attitudes toward risk, and, of course, the payoff structure itself.…
We propose two structural models for stochastic losses given default which allow to model the credit losses of a portfolio of defaultable financial instruments. The credit losses are integrated into a structural model of default events…
We discuss the role of information entropy on the behaviour of random processes, and how this might take effect in the dynamics of financial market prices. We then go on to show how the Open Quantum Systems approach can be used as a more…
We propose a model for an insurance loss index and the claims process of a single insurance company holding a fraction of the total number of contracts that captures both ordinary losses and losses due to catastrophes. In this model we…
Machine learning in asset pricing typically predicts expected returns as point estimates, ignoring uncertainty. We develop new methods to construct forecast confidence intervals for expected returns obtained from neural networks. We show…
This paper considers the case of pricing discretely-sampled variance swaps under the class of equity-interest rate hybridization. Our modeling framework consists of the equity which follows the dynamics of the Heston stochastic volatility…
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 computation of model-free bounds for multi-asset options in a setting that combines dependence uncertainty with additional information on the dependence structure. More specifically, we consider the setting where the…
We investigate the optimal investment-reinsurance problem for insurance company with partial information on the market price of the risk. Through the use of filtering techniques we convert the original optimization problem involving…
When investors have heterogeneous attitudes towards risk, it is reasonable to assume that each investor has a pricing kernel, and that these individual pricing kernels are aggregated to form a market pricing kernel. The various investors…
In this paper we modify the model of Itkin, Shcherbakov and Veygman, (2019) (ISV2019), proposed for pricing Quanto Credit Default Swaps (CDS) and risky bonds, in several ways. First, it is known since the Lehman Brothers bankruptcy that the…
Much research in systemic risk is focused on default contagion. While this demands an understanding of valuation, fewer articles specifically deal with the existence, the uniqueness, and the computation of equilibrium prices in structural…
The notion of a credit spread curve is fundamental in fixed income investing, but in practice it is not `given' and needs to be constructed from bond prices either for a particular issuer, or for a sector rating-by-rating. Rather than…
A multi-dimensional extension of the structural default model with firms' values driven by diffusion processes with Marshall-Olkin-inspired correlation structure is presented. Semi-analytical methods for solving the forward calibration…