Related papers: A Top-down Model for Cash CLO
We present an extension to a certified financial contract management system that allows for templated declarative financial contracts and for integration with financial stochastic models through verified compilation into so-called…
Systemic risk is a rapidly developing area of research. Classical financial models often do not adequately reflect the phenomena of bubbles, crises, and transitions between them during credit cycles. To study very improbable events,…
In this paper, we propose a clearing model for prices in a financial markets due to margin calls on short sold assets. In doing so, we construct an explicit formulation for the prices that would result immediately following asset purchases…
Measuring model risk is required by regulators on financial and insurance markets. We separate model risk into parameter estimation risk and model specification risk, and we propose expected shortfall type model risk measures applied to…
Bottom-up layout algorithms for compound graphs are suitable for presenting the microscale view of models and are often used in model-driven engineering. However, they have difficulties at the macroscale where maintaining the overview of…
We introduce a stacking version of the Monte Carlo algorithm in the context of option pricing. Introduced recently for aeronautic computations, this simple technique, in the spirit of current machine learning ideas, learns control variates…
The increasingly complex economic and financial environment in which we live makes the management of liquidity in payment systems and the economy in general a persistent challenge. New technologies are making it possible to address this…
Predictive models are finding an increasing number of applications in many industries. As a result, a practical means for trading-off the cost of deploying a model versus its effectiveness is needed. Our work is motivated by risk prediction…
This paper introduces a methodology leveraging Large Language Models (LLMs) for sector-level portfolio allocation through systematic analysis of macroeconomic conditions and market sentiment. Our framework emphasizes top-down sector…
The collateral choice option gives the collateral posting party the opportunity to switch between different collateral currencies which is well-known to impact the asset price. Quantification of the option's value is of practical importance…
The author presents alternatives to the Black-Scholes european call option pricing model by incorporating different transaction cost structures in the replicating strategy. In particular, an exponentially decreasing structure is proposed…
The need for control strategies that can address dynamic system uncertainty is becoming increasingly important. In this work, we propose a Model Predictive Control by quantifying the risk of failure in our system model. The proposed control…
The aim of this paper is to define the market-consistent multi-period value of an insurance liability cash flow in discrete time subject to repeated capital requirements, and explore its properties. In line with current regulatory…
Typically options with a path dependent payoff, such as Target Accumulation Redemption Note (TARN), are evaluated by a Monte Carlo method. This paper describes a finite difference scheme for pricing a TARN option. Key steps in the proposed…
In FX cash markets, market makers provide liquidity to clients for a wide variety of currency pairs. Because of flow uncertainty and market volatility, they face inventory risk. To mitigate this risk, they typically skew their prices to…
A generalized continuous economic model is proposed for random markets. In this model, agents interact by pairs and exchange their money in a random way. A parameter controls the effectiveness of the transactions between the agents. We show…
The time proximity of high-frequency trades can contain a salient signal. In this paper, we propose a method to classify every trade, based on its proximity with other trades in the market within a short period of time, into five types. By…
Layer-two blockchain protocols emerged to address scalability issues related to fees, storage cost, and confirmation delay of on-chain transactions. They aggregate off-chain transactions into a fewer on-chain ones, thus offering immediate…
In a stochastic volatility framework, we find a general pricing equation for the class of payoffs depending on the terminal value of a market asset and its final quadratic variation. This allows a pricing tool for European-style claims…
Monte Carlo is a simple and flexible tool that is widely used in computational finance. In this context, it is common for the quantity of interest to be the expected value of a random variable defined via a stochastic differential equation.…