Related papers: On Pricing Basket Credit Default Swaps
We present a statistical test that can be used to verify supervisory requirements concerning overlapping time windows for the long-term calibration in rating systems. In a first step, we show that the long-run default rate is approximately…
We study dropout regularization in continuous-time models through the lens of random-batch methods -- a family of stochastic sampling schemes originally devised to reduce the computational cost of interacting particle systems. We construct…
We derive a new high-order compact finite difference scheme for option pricing in stochastic volatility jump models, e.g. in Bates model. In such models the option price is determined as the solution of a partial integro-differential…
This paper generalizes Moody's correlated binomial default distribution for homogeneous (exchangeable) credit portfolio, which is introduced by Witt, to the case of inhomogeneous portfolios. As inhomogeneous portfolios, we consider two…
The collateral choice option gives the collateral posting party the opportunity to switch between different collateral currencies which is well-known to impact the asset price. Quantification of the option's value is of practical importance…
In the paper we study dynamics of the arbitrage prices of credit default swaps within a hazard process model of credit risk. We derive these dynamics without postulating that the immersion property is satisfied between some relevant…
We present a generative framework for pricing European-style basket options by learning the conditional terminal distribution of the log arithmetic-weighted basket return. A Mixture Density Network (MDN) maps time-varying market inputs…
Banks and financial institutions all over the world manage portfolios containing tens of thousands of customers. Not all customers are high credit-worthy, and many possess varying degrees of risk to the Bank or financial institutions that…
We propose a general methodology for recovering preference parameters from data on choices and response times. Our methods yield estimates with fast ($1/n$ for $n$ data points) convergence rates when specialized to the popular Drift…
Service platforms must determine rules for matching heterogeneous demand (customers) and supply (workers) that arrive randomly over time and may be lost if forced to wait too long for a match. Our objective is to maximize the cumulative…
Options on baskets (linear combinations) of assets are notoriously challenging to price using even the simplest log-normal continuous-time stochastic models for the individual assets. The paper [5] gives a closed form approximation formula…
In this paper, the heterogeneous distributed quickest change detection (HetDQCD) with 1-bit non-anonymous feedback is studied. The concept of syndromes is introduced and the family of syndrome-based fusion rules is proposed, which…
The method of distributions is developed for systems that are governed by hyperbolic conservation laws with stochastic forcing. The method yields a deterministic equation for the cumulative density distribution (CDF) of a system state,…
We study collective decision-making in a model of human groups, with network interactions, performing two alternative choice tasks. We focus on the speed-accuracy tradeoff, i.e., the tradeoff between a quick decision and a reliable…
We propose a model for the credit markets in which the random default times of bonds are assumed to be given as functions of one or more independent "market factors". Market participants are assumed to have partial information about each of…
We propose a model in which dividend payments occur at regular, deterministic intervals in an otherwise continuous model. This contrasts traditional models where either the payment of continuous dividends is controlled or the dynamics are…
Local diffusion coefficients in disordered systems such as spin glass systems and living cells are highly heterogeneous and may change over time. Such a time-dependent and spatially heterogeneous environment results in irreproducibility of…
The indirect approach to continuous-time system identification consists in estimating continuous-time models by first determining an appropriate discrete-time model. For a zero-order hold sampling mechanism, this approach usually leads to a…
We present a theory and accompanying importance sampling method for computing rate constants in spatially inhomogenious systems. Using the relationship between rate constants and path space partition functions, we illustrate that the…
Derivative traders are usually required to scan through hundreds, even thousands of possible trades on a daily basis. Up to now, not a single solution is available to aid in their job. Hence, this work aims to develop a trading…