Related papers: Certifiably Pseudorandom Financial Derivatives
We introduce signature payoffs, a family of path-dependent derivatives that are given in terms of the signature of the price path of the underlying asset. We show that these derivatives are dense in the space of continuous payoffs, a result…
A seller posts a price for a single object. The seller's and buyer's values may be interdependent. We characterize the set of payoff vectors across all information structures. Simple feasibility and individual-rationality constraints…
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…
Derivative pricing is about cash flow discounting at the riskfree rate. This teaching has lost its meaning post the financial crisis, due to the addition of extra value adjustments (XVA), which also made derivatives pricing and valuation a…
We study pseudorandomness and pseudorandom generators from the perspective of logical definability. Building on results from ordinary derandomization and finite model theory, we show that it is possible to deterministically construct, in…
We propose a novel credit default model that takes into account the impact of macroeconomic information and contagion effect on the defaults of obligors. We use a set-valued Markov chain to model the default process, which is the set of all…
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.…
In the spirit of Arrow-Debreu, we introduce a family of financial derivatives that act as primitive securities in that exotic derivatives can be approximated by their linear combinations. We call these financial derivatives signature…
DeMarzo et al. (2005) consider auctions in which bids are selected from a completely ordered family of securities whose values are tied to the resource being auctioned. The paper defines a notion of relative steepness of families of…
This paper focuses on the expected difference in borrower's repayment when there is a change in the lender's credit decisions. Classical estimators overlook the confounding effects and hence the estimation error can be magnificent. As such,…
This paper presents a new model for pricing financial derivatives subject to collateralization. It allows for collateral arrangements adhering to bankruptcy laws. As such, the model can back out the market price of a collateralized…
The paper reviews origins of the approach to pricing derivatives post-crisis by following three papers that have received wide acceptance from practitioners as the theoretical foundations for it - [Piterbarg 2010], [Burgard and Kjaer 2010]…
We study the pricing of credit derivatives with asymmetric information. The managers have complete information on the value process of the firm and on the default threshold, while the investors on the market have only partial observations,…
American and Bermudan-type financial instruments are often priced with specific Monte Carlo techniques whose efficiency critically depends on the effective dimensionality of the problem and the available computational power. In our work we…
How does one compile derivatives of tensor programs, such that the resulting code is purely functional (hence easier to optimize and parallelize) and provably efficient relative to the original program? We show that naively differentiating…
The smooth function reconstruction needs to use derivatives. In 2010, we used the gradually varied derivatives to successfully constructed smooth surfaces for real data. We also briefly explained why the gradually varied derivatives are…
Using tools from spectral analysis, singular and regular perturbation theory, we develop a systematic method for analytically computing the approximate price of a derivative-asset. The payoff of the derivative-asset may be path-dependent.…
Credit Value Adjustment (CVA) is the difference between the value of the default-free and credit-risky derivative portfolio, which can be regarded as the cost of the credit hedge. Default probabilities are therefore needed, as input…
The literature has covered the features and uses of the traditional univariate and bivariate logistic distributions in great detail. It is reasonable to wonder, though, if logistic marginals and conditionals could exhibit a similar…
Symbolic regression aims to discover interpretable equations from data, yet modern gradient-based methods fail for operators that introduce singularities or domain constraints, including division, logarithms, and square roots. As a result,…