Related papers: Clean Valuation Framework for the USD Silo
In this work, we develop a novel efficient quadrature and sparse grid based polynomial interpolation method to price American options with multiple underlying assets. The approach is based on first formulating the pricing of American…
Credit Valuation Adjustment is a balance sheet item which is nowadays subject to active risk management by specialized traders. However, one of the most important risk factors, which is the vector of default intensities of the counterparty,…
The present paper provides the basis for a novel financial asset pricing model that could avoid the shortcomings of, or even completely replace the traditional DCF model. The model is based on Brownian motion logic and expected future cash…
This paper studies the valuation of a class of default swaps with the embedded option to switch to a different premium and notional principal anytime prior to a credit event. These are early exercisable contracts that give the protection…
Maximum distance separable (MDS) codes have the optimal trade-off between storage efficiency and fault tolerance, which are widely used in distributed storage systems. As typical non-MDS codes, simple regenerating codes (SRCs) can achieve…
The time dependence of the currency exchange rate K treated as a function of national dividend, investments and difference between total demand for a goods and supply is considered. To do this a proposed earlier general algorithm of…
To achieve interoperability between unconnected ledgers, hash time lock contracts (HTLCs) are commonly used for cross-chain asset exchange. The solution tolerates transaction failure, and can "make the best out of worst'' by allowing…
In this paper, we consider the problem of pricing discretely-sampled variance swaps based on a hybrid model of stochastic volatility and stochastic interest rate with regime-switching. Our modelling framework extends the Heston stochastic…
Sequential Monte Carlo (SMC) methods have successfully been used in many applications in engineering, statistics and physics. However, these are seldom used in financial option pricing literature and practice. This paper presents SMC method…
Persistent financial frictions - including price volatility, constrained credit access, and supply chain inefficiencies - have long hindered productivity and welfare in the global agricultural sector. This paper provides a theoretical and…
This paper describes a flexible and tractable bottom-up dynamic correlation modelling framework with a consistent stochastic recovery specification. The stochastic recovery specification only models the first two moments of the spot…
This paper proposes a new one-sided matching market model in which every agent has a cost function that is allowed to take a negative value. Our model aims to capture the situation where some agents can profit by exchanging their obtained…
We derive valuations of a portfolio of financial instruments from a securities lending perspective, under different assumptions, and show a weighting scheme that converges to the true valuation. We illustrate conditions under which our…
In this paper we study the pricing of exchange options when underlying assets have stochastic volatility and stochastic correlation. An approximation using a closed-form approximation based on a Taylor expansion of the conditional price is…
This paper addresses a key challenge in CDO modeling: achieving a perfect fit to market prices across all tranches using a single, consistent model. The existence of such a perfect-fit model implies the absence of arbitrage among CDO…
In a universe with a single currency, there would be no foreign exchange market, no foreign exchange rates, and no foreign exchange. Over the past twenty-five years, the way the market has performed those tasks has changed enormously. The…
Many cloud service providers (CSPs) provide on-demand service at a price with a small delay. We propose a QoS-differentiated model where multiple SLAs deliver both on-demand service for latency-critical users and delayed services for…
In markets with transaction costs, consistent price systems play the same role as martingale measures in frictionless markets. We prove that if a continuous price process has conditional full support, then it admits consistent price systems…
This paper presents a general framework for the design and analysis of exchange mechanisms between two assets that unifies and enables comparisons between the two dominant paradigms for exchange, constant function market markers (CFMMs) and…
This short note illustrates the theoretical solution to a trader determining how to optimally swap her wealth into a target asset through on-chain operations. It offers the framework to solve optimal slippage parameters and optimal trade…