Related papers: A Top-down Model for Cash CLO
Current post-trade clearing systems rely almost exclusively on cash or cash-like collateral, leaving vast reserves of short-term liquidity embedded in trade credit outside formal settlement infrastructures. A key barrier to integrating this…
Stochastic clocks represent a class of time change methods for incorporating trading activity into continuous-time financial models, with the ability to deal with typical asymmetrical and tail risks in financial returns. In this paper we…
State-of-the-art large language models require specialized hardware and substantial energy to operate. As a consequence, cloud-based services that provide access to large language models have become very popular. In these services, the…
We develop a parsimonious model of an e-commerce fulfillment center that offers time-dependent shipment options and corresponding fees to utility-maximizing customers arriving according to a Poisson process. For any such policy, we provide…
A method for analysing the risk of taking a too low reserve level by use of Chain Ladder method is developed. We give an answer to the question of how much safety loading in terms of the Chain Ladder standard error has to be added to the…
We show how to extend a recently proposed multi-level Monte Carlo approach to the continuous time Markov chain setting, thereby greatly lowering the computational complexity needed to compute expected values of functions of the state of the…
We extend the QLBS model by reformulating via considering a large trader whose transactions leave a permanent impact on the evolution of the exchange rate process and therefore affect the price of contingent claims on such processes.…
Mounting empirical evidence suggests that the observed extreme prices within a trading period can provide valuable information about the volatility of the process within that period. In this paper we define a class of stochastic volatility…
Quanto options allow the buyer to exchange the foreign currency payoff into the domestic currency at a fixed exchange rate. We investigate quanto options with multiple underlying assets valued in different foreign currencies each with a…
In this paper, we describe a novel agent-based approach for modelling the transaction cost of buying or selling an asset in financial markets, e.g., to liquidate a large position as a result of a margin call to meet financial obligations.…
This paper presents a derivation of the explicit price for the perpetual American put option in the Black-Scholes model, time-capped by the first drawdown epoch beyond a predefined level. We demonstrate that the optimal exercise strategy…
Large language models (LLMs) have emerged as powerful tools in the field of finance, particularly for risk management across different asset classes. In this work, we introduce a Cross-Asset Risk Management framework that utilizes LLMs to…
The present paper provides the basis for a novel financial asset pricing model that could avoid the shortcomings of, or even completely replace the traditional DCF model. The model is based on Brownian motion logic and expected future cash…
Cloud providers offer end-users various pricing schemes to allow them to tailor VMs to their needs, e.g., a pay-as-you-go billing scheme, called \textit{on-demand}, and a discounted contract scheme, called \textit{reserved instances}. This…
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…
Large Language Models (LLMs) are increasingly embedded in enterprise workflows, yet their performance remains highly sensitive to prompt design. Automatic Prompt Optimization (APO) seeks to mitigate this instability, but existing approaches…
We study collusion in a second-price auction with two bidders in a dynamic environment. One bidder can make a take-it-or-leave-it collusion proposal, which consists of both an offer and a request of bribes, to the opponent. We show that…
The problem of market clearing is to set a price for an item such that quantity demanded equals quantity supplied. In this work, we cast the problem of predicting clearing prices into a learning framework and use the resulting models to…
In the context of understanding the nature of the risk transformation process of the financial system we propose an iterative risk-trading game between several agents who build their trading strategies based on a general utility setting.…
The Pareto model is very popular in risk management, since simple analytical formulas can be derived for financial downside risk measures (Value-at-Risk, Expected Shortfall) or reinsurance premiums and related quantities (Large Claim Index,…