Related papers: Discretely sampled variance and volatility swaps v…
We investigate the relation between the fair price for European-style vanilla options and the distribution of short-term returns on the underlying asset ignoring transaction and other costs. We compute the risk-neutral probability density…
As operators acting on the undetermined final settlement of a derivative security, expectation is linear but price is non-linear. When the market of underlying securities is incomplete, non-linearity emerges from the bid-offer around the…
The Contextuality-by-Default approach to determining and measuring the (non)contextuality of a system of random variables requires that every random variable in the system be represented by an equivalent set of dichotomous random variables.…
High-frequency data observed on the prices of financial assets are commonly modeled by diffusion processes with micro-structure noise, and realized volatility-based methods are often used to estimate integrated volatility. For problems…
There are many studies on development of models for analyzing some derivatives such as credit default swaps .
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…
This paper shows the relationship between the forward start volatility swap price and the forward start zero vanna implied volatility of forward start options in rough volatility models. It is shown that in the short time-to-maturity limit…
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 latest generation of volatility derivatives goes beyond variance and volatility swaps and probes our ability to price realized variance and sojourn times along bridges for the underlying stock price process. In this paper, we give an…
This paper examines how shocks to currency volatilities predict exchange rates. Using option-implied volatilities, we construct a dynamic, directed network of volatility connections. Currencies that transmit more volatility shocks, which…
This paper proposes swaps on two important new measures of generalized variance, namely the maximum eigen-value and trace of the covariance matrix of the assets involved. We price these generalized variance swaps for financial markets with…
We correct two errors in our paper [4]. First error concerns the definition of the SVI solution, where a boundary term which arises due to the Dirichlet boundary condition, was not included. The second error concerns the discrete estimate…
The problem of the estimation of relevance to a set of histograms generated by samples of a discrete time process is discussed on the base of the variational principles proposed in the previous paper [1]. Some conditions for dimension…
The problem of approximating the discrete spectra of families of self-adjoint operators that are merely strongly continuous is addressed. It is well-known that the spectrum need not vary continuously (as a set) under strong perturbations.…
We study prior-independent pricing for selling a single item to a single buyer when the seller observes only a single sample from the valuation distribution, while the buyer knows the distribution. Classical robust pricing approaches either…
We study the gaps between consecutive singular values of random rectangular matrices. Specifically, if $M$ is an $n \times p$ random matrix with independent and identically distributed entries and $\Sigma$ is a $n \times n$ deterministic…
We develop a robust framework for pricing and hedging of derivative securities in discrete-time financial markets. We consider markets with both dynamically and statically traded assets and make minimal measurability assumptions. We obtain…
Using the asymptotical minimax framework, we examine convergence rates equivalency between a continuous functional deconvolution model and its real-life discrete counterpart over a wide range of Besov balls and for the $L^2$-risk. For this…
Local Stochastic Volatility (LSV) models have been used for pricing and hedging derivatives positions for over twenty years. An enormous body of literature covers analytical and numerical techniques for calibrating the model to market data.…
The paper develops general, discrete, non-probabilistic market models and minmax price bounds leading to price intervals for European options. The approach provides the trajectory based analogue of martingale-like properties as well as a…