Related papers: Valuation Bound of Tranche Options
There exist several methods how more general options can be priced with call prices. In this article, we extend these results to cover a wider class of options and market models. In particular, we introduce a new pricing formula which can…
In this article, we combine replication pricing with expectation pricing for derivative trades that are partially collateralized by cash. The derivatives are replicated by underlying assets and cash, using repurchasing agreement (repo) and…
We revisit the deadline version of the discrete time-cost tradeoff problem for the special case of bounded depth. Such instances occur for example in VLSI design. The depth of an instance is the number of jobs in a longest chain and is…
Conditional Asian options are recent market innovations, which offer cheaper and long-dated alternatives to regular Asian options. In contrast with payoffs from regular Asian options which are based on average asset prices, the payoffs from…
In this paper, using the structural approach is derived a mathematical model of the discrete coupon bond with the provision that allow the holder to demand early redemption at any coupon dates prior to the maturity and based on this model…
We consider plain vanilla European options written on an underlying asset that follows a continuous time semi-Markov multiplicative process. We derive a formula and a renewal type equation for the martingale option price. In the case in…
Recent theoretical results establish that time-consistent valuations (i.e. pricing operators) can be created by backward iteration of one-period valuations. In this paper we investigate the continuous-time limits of well-known actuarial…
We study a market model in which the volatility of the stock may jump at a random time from a fixed value to another fixed value. This model was already described in the literature. We present a new approach to the problem, based on partial…
The main result of this paper is a collateralized counterparty valuation adjusted pricing equation, which allows to price a deal while taking into account credit and debit valuation adjustments (CVA, DVA) along with margining and funding…
We develop a novel deep learning approach for pricing European options in diffusion models, that can efficiently handle high-dimensional problems resulting from Markovian approximations of rough volatility models. The option pricing partial…
Option pricing is a significant problem for option risk management and trading. In this article, we utilize a framework to present financial data from different sources. The data is processed and represented in a form of 2D tensors in three…
CDS (credit default swap) contracts that were initiated some time ago frequently have spreads and/or maturities that are not available on the current market of CDSs, and are thus illiquid. This article introduces an incomplete-market…
Using neural networks, we compute bounds on the prices of multi-asset derivatives given information on prices of related payoffs. As a main example, we focus on European basket options and include information on the prices of other similar…
Continuous time financial market models are often motivated as scaling limits of discrete time models. The objective of this paper is to establish such a connection for a robust framework. More specifically, we consider discrete time models…
Transition risk can be defined as the business-risk related to the enactment of green policies, aimed at driving the society towards a sustainable and low-carbon economy. In particular, the value of certain firms' assets can be lower…
We use the theory of large deviations to study the pricing of investment-grade tranches of synthetic CDO's. In this paper, we consider a simplified model which will allow us to introduce some of the concepts and calculations.
In this article, a three-time levels compact scheme is proposed to solve the partial integro-differential equation governing the option prices under jump-diffusion models. In the proposed compact scheme, the second derivative approximation…
Central clearing counterparty houses (CCPs) play a fundamental role in mitigating the counterparty risk for exchange traded options. CCPs cover for possible losses during the liquidation of a defaulting member's portfolio by collecting…
We introduce an innovative theoretical framework to model derivative transactions between defaultable entities based on the principle of arbitrage freedom. Our framework extends the traditional formulations based on Credit and Debit…
An efficient conditioning technique, the so-called Brownian Bridge simulation, has previously been applied to eliminate pricing bias that arises in applications of the standard discrete-time Monte Carlo method to evaluate options written on…