Related papers: Erratum for: Smile dynamics -- a theory of the imp…

In this note, we develop stock option price approximations for a model which takes both the risk o default and the stochastic volatility into account. We also let the intensity of defaults be influenced by the volatility. We show that it…

In general, underestimation of risk is something which should be avoided as far as possible. Especially in financial asset management, equity risk is typically characterized by the measure of portfolio variance, or indirectly by quantities…

This papers addresses the stock option pricing problem in a continuous time market model where there are two stochastic tradable assets, and one of them is selected as a num\'eraire. It is shown that the presence of arbitrarily small…

In this paper, we present a method for constructing a (static) portfolio of co-maturing European options whose price sign is determined by the skewness level of the associated implied volatility. This property holds regardless of the…

We propose a discrete time algorithm for the valuation of employee stock options based on exponential indifference prices and taking into account both the possibility of partial exercise of a fraction of the options and the use of a…

In this paper we develop a novel neural network model for predicting implied volatility surface. Prior financial domain knowledge is taken into account. A new activation function that incorporates volatility smile is proposed, which is used…

We investigate the internal structure of language model computations using causal analysis and demonstrate two motifs: (1) a form of adaptive computation where ablations of one attention layer of a language model cause another layer to…

We encounter variables with little variation often in educational data mining (EDM) due to the demographics of higher education and the questions we ask. Yet, little work has examined how to analyze such data. Therefore, we conducted a…

We observe that a European Call option with strike $L > K$ can be seen as a Call option with strike $L-K$ on a Call option with strike $K$. Under no arbitrage assumptions, this yields immediately that the prices of the two contracts are the…

We model leverage as stochastic but independent of return shocks and of volatility and perform likelihood-based inference via the recently developed iterated filtering algorithm using S&P500 data, contributing new evidence to the still slim…

An important but understudied question in economics is how people choose when facing uncertainty in the timing of events. Here we study preferences over time lotteries, in which the payment amount is certain but the payment time is…

Modern financial market dynamics warrant detailed analysis due to their significant impact on the world. This, however, often proves intractable; massive numbers of agents, strategies and their change over time in reaction to each other…

Individual-specific, time-constant, random effects are often used to model dependence and/or to account for omitted covariates in regression models for longitudinal responses. Longitudinal studies have known a huge and widespread use in the…

The prevailing assumption of an exponential decay in large language model (LLM) reliability with sequence length, predicated on independent per-token error probabilities, posits an inherent limitation for long autoregressive outputs. Our…

This short note aims to point out mistakes in one of the implications for Theorem 2.8 in Bayraktar and Yu [Mathematical Finance, 28 (2018), pp. 800-838], which weakens the statement of this theorem.

As the decade turns, we reflect on nearly thirty years of successful manipulation of the world's public equity markets. This reflection highlights a few of the key enabling ingredients and lessons learned along the way. A quantitative…

We present a perturbation theory of the market impact based on an extension of the framework proposed by [Loeper, 2018] -- originally based on [Liu and Yong, 2005] -- in which we consider only local linear market impact. We study the…

Text-based financial networks are increasingly used to study cross-stock return predictability. A common approach constructs links from similarities in firms' disclosure embeddings, but such networks often contain spurious edges because…

People often deviate from expected utility theory when making risky and intertemporal choices. While the effects of probabilistic risk and time delay have been extensively studied in isolation, their interplay and underlying theoretical…

We consider the impact of ambiguity on the optimal timing of a class of two-dimensional integral option contracts when the exercise payoff is a positively homogeneous measurable function. Hence, the considered class of exercise payoffs…