Related papers: On the Hedging of Options On Exploding Exchange Ra…
In this article we develop an explicit formula for pricing European options when the underlying stock price follows a non-linear stochastic differential delay equation (sdde). We believe that the proposed model is sufficiently flexible to…
A standard assumption in machine learning is the exchangeability of data, which is equivalent to assuming that the examples are generated from the same probability distribution independently. This paper is devoted to testing the assumption…
Pricing composite and quanto contracts requires a joint model of both the underlying asset and the exchange rate. In this contribution, we explore the potential of local-correlation models to address the challenges of calibrating synthetic…
Most models for barrier pricing are designed to let a market maker tune the model-implied covariance between moves in the asset spot price and moves in the implied volatility skew. This is often implemented with a local…
We consider an exchange who wishes to set suitable make-take fees to attract liquidity on its platform. Using a principal-agent approach, we are able to describe in quasi-explicit form the optimal contract to propose to a market maker. This…
There exist several methods how more general options can be priced with call prices. In this article, we extend these results to cover a wider class of options and market models. In particular, we introduce a new pricing formula which can…
The aim of this work is to introduce a new stochastic volatility model for equity derivatives. To overcome some of the well-known problems of the Heston model, and more generally of the affine models, we define a new specification for the…
We propose a fast and accurate numerical method for pricing European swaptions in multi-factor Gaussian term structure models. Our method can be used to accelerate the calibration of such models to the volatility surface. The pricing of an…
The paper investigates quadratic hedging in a semimartingale market that does not necessarily contain a risk-free asset. An equivalence result for hedging with and without numeraire change is established. This permits direct computation of…
We present a semi-static hedging algorithm for callable interest rate derivatives under an affine, multi-factor term-structure model. With a traditional dynamic hedge, the replication portfolio needs to be updated continuously through time…
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…
This paper proposes a numerical method for pricing foreign exchange (FX) options in a model which deals with stochastic interest rates and stochastic volatility of the FX rate. The model considers four stochastic drivers, each represented…
This work proposes a new exchangeability test for a random sequence through a martingale based approach. Its main contributions include: 1) an additive martingale which is more amenable for designing exchangeability tests by exploiting the…
The paper proposes a class of financial market models which are based on inhomogeneous telegraph processes and jump diffusions with alternating volatilities. It is assumed that the jumps occur when the tendencies and volatilities are…
The term `surrogate modeling' in computational science and engineering refers to the development of computationally efficient approximations for expensive simulations, such as those arising from numerical solution of partial differential…
An agent-based modelling methodology for the joint price evolution of two stocks is put forward. The method models future multidimensional price trajectories reflecting how a class of agents rebalance their portfolios in an operational way…
The purpose of the present paper is the analysis of a model describing how herd behaviour and self-fulfilling prophecies can influence currency exchange rates, and what the impact of a currency transaction tax would be. These considerations…
Let $M$ be a von Neumann algebra and let $(N_t)_{t\in[0,T]}$ be an increasing family of abelian von Neumann subalgebras encoding a (classical) information flow. Fix a faithful normal state $\varphi_\rho$ and a filtration of normal…
This paper offers a systematic investigation on the existence of equivalent local martingale deflators, which are multiplicative special semimartingales, in financial markets given by positive semimartingales. In particular, it shows that…
We consider a financial market with one riskless and one risky asset. The super-replication theorem states that there is no duality gap in the problem of super-replicating a contingent claim under transaction costs and the associated dual…