Related papers: Calculating Variable Annuity Liability 'Greeks' Us…
In this paper, we adopted a net liability model which assesses both market risk on the liability side and revenue risk on the asset side for a Guaranteed Minimum Maturity Benefit (GMMB) embedded in variable annuity (VA) contracts. Numeric…
In a recent paper, we have demonstrated how the affinity between TPUs and multi-dimensional financial simulation resulted in fast Monte Carlo simulations that could be setup in a few lines of python Tensorflow code. We also presented a…
This paper deals with the computation of second or higher order greeks of financial securities. It combines two methods, Vibrato and automatic differentiation and compares with other methods. We show that this combined technique is faster…
Insurance companies make extensive use of Monte Carlo simulations in their capital and solvency models. To overcome the computational problems associated with Monte Carlo simulations, most large life insurance companies use proxy models…
This report investigates the computation of option Greeks for European and Asian options under the Heston stochastic volatility model on GPU. We first implemented the exact simulation method proposed by Broadie and Kaya and used it as a…
Analytical, free of time consuming Monte Carlo simulations, framework for credit portfolio systematic risk metrics calculations is presented. Techniques are described that allow calculation of portfolio-level systematic risk measures…
This paper proposes a paradigm shift in the valuation of long term annuities, away from classical no-arbitrage valuation towards valuation under the real world probability measure. Furthermore, we apply this valuation method to two examples…
This paper proposes a market consistent valuation framework for variable annuities with guaranteed minimum accumulation benefit, death benefit and surrender benefit features. The setup is based on a hybrid model for the financial market and…
As part of the new regulatory framework of Solvency II, introduced by the European Union, insurance companies are required to monitor their solvency by computing a key risk metric called the Solvency Capital Requirement (SCR). The official…
There are no known exact formulas for the valuation of a number of exotic options, and this is particularly true for options under discrete monitoring and for American style options. Therefore, one usually recourses to a Monte Carlo…
In this article, we investigate the behavior of long-term options. In many cases, option prices follow an exponential decay (or growth) rate for further maturity dates. We determine under what conditions option prices are characterized by…
This paper is concerned with the asymptotics for Greeks of European-style options and the risk-neutral density function calculated under the constant elasticity of variance model. Formulae obtained help financial engineers to construct a…
In this work we are concerned with valuing optionalities associated to invest or to delay investment in a project when the available information provided to the manager comes from simulated data of cash flows under historical (or…
In this work, we introduce a Monte Carlo method for the dynamic hedging of general European-type contingent claims in a multidimensional Brownian arbitrage-free market. Based on bounded variation martingale approximations for…
We propose a new `hedged' Monte-Carlo (HMC) method to price financial derivatives, which allows to determine simultaneously the optimal hedge. The inclusion of the optimal hedging strategy allows one to reduce the financial risk associated…
This study presents contemporaneous modeling of asset return and price range within the framework of stochastic volatility with leverage. A new representation of the probability density function for the price range is provided, and its…
We review and apply Quasi Monte Carlo (QMC) and Global Sensitivity Analysis (GSA) techniques to pricing and risk management (greeks) of representative financial instruments of increasing complexity. We compare QMC vs standard Monte Carlo…
We introduce a new method to price American-style options on underlying investments governed by stochastic volatility (SV) models. The method does not require the volatility process to be observed. Instead, it exploits the fact that the…
The hybrid Monte Carlo (HMC) algorithm is applied for the Bayesian inference of the stochastic volatility (SV) model. We use the HMC algorithm for the Markov chain Monte Carlo updates of volatility variables of the SV model. First we…
Extreme volatility, nonlinear dependencies, and systemic fragility are characteristics of cryptocurrency markets. The assumptions of normality and centralized control in traditional financial risk models frequently cause them to miss these…