Related papers: Clean Valuation Framework for the USD Silo
This paper describes a consistent and arbitrage-free pricing methodology for bespoke CDO tranches. The proposed method is a multi-factor extension to the (Li 2009) model, and it is free of the known flaws in the current standard pricing…
In this paper we develop a tractable structural model with analytical default probabilities depending on some dynamics parameters, and we show how to calibrate the model using a chosen number of Credit Default Swap (CDS) market quotes. We…
World currency network constitutes one of the most complex structures that is associated with the contemporary civilization. On a way towards quantifying its characteristics we study the cross correlations in changes of the daily foreign…
Accurate forecasting of the EUR/USD exchange rate is crucial for investors, businesses, and policymakers. This paper proposes a novel framework, IUS, that integrates unstructured textual data from news and analysis with structured data on…
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…
This article presents a new model for valuing a credit default swap (CDS) contract that is affected by multiple credit risks of the buyer, seller and reference entity. We show that default dependency has a significant impact on asset…
We evaluate the average waiting time between observing the price of financial markets and the next price change, especially in an on-line foreign exchange trading service for individual customers via the internet. Basic technical idea of…
We present a general derivation of the arbitrage-free pricing framework for multiple-currency collateralized products. We include the impact on option pricing of the policy adopted to fund in foreign currency, so that we are able to price…
In this work we derive an approximated no-arbitrage market valuation formula for Constant Maturity Credit Default Swaps (CMCDS). We move from the CDS options market model in Brigo (2004), and derive a formula for CMCDS that is the analogous…
In this paper we present a rigorously motivated pricing equation for derivatives, including general cash collateralization schemes, which is consistent with quoted market bond prices. Traditionally, there have been differences in how…
The plethora of comparison shopping agents (CSAs) in today's markets enables buyers to query more than a single CSA when shopping, and an inter-CSAs competition naturally arises. We suggest a new approach, termed "selective price…
We propose a useful approach for investigating the statistical properties of foreign currency exchange rates. Our approach is based on queueing theory, particularly, the so-called renewal-reward theorem. For the first passage processes of…
The complexity and ambiguity of financial and economic systems, along with frequent changes in the economic environment, have made it difficult to make precise predictions that are supported by theory-consistent explanations. Interpreting…
The decentralized international market of currency trading is a prototypical complex system having a highly heterogeneous composition. To understand the hierarchical structure relating the price movement of different currencies in the…
We generalize the results of Bielecki and Rutkowski (2015) on funding and collateralization to a multi-currency framework and link their results with those of Piterbarg (2012), Moreni and Pallavicini (2017), and Fujii et al. (2010b). In…
Cash collateral is perfect in that it provides simultaneous counterparty credit risk protection and derivatives funding. Securities are imperfect collateral, because of collateral segregation or differences in CSA haircuts and repo…
We propose a Central Bank Digital Currency Evaluation and Verification (CEV) Framework for recommending and verifying technical solutions in the central bank digital currency (CBDC) system. We demonstrate two sub-frameworks: an evaluation…
Recently, incomplete-market techniques have been used to develop a model applicable to credit default swaps (CDSs) with results obtained that are quite different from those obtained using the market-standard model. This article makes use of…
This paper provides intuition on the relationship of accrual and mark-to-market valuation for cash and forward interest rate trades. Discounted cashflow valuation is compared to spread-based valuation for forward trades, which explains the…
In this paper, we present a summary of the design and implementation of a simulation of post-trade services for interest rate swaps, from execution to maturity. We use an authoritative data store (ADS) and the International Swaps and…