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The market practice of extrapolating different term structures from different instruments lacks a rigorous justification in terms of cash flows structure and market observables. In this paper, we integrate our previous consistent theory for…
This work studies the valuation of currency options in markets suffering from a financial crisis. We consider a European option where the underlying asset is a foreign currency. We assume that the value of the underlying asset is a…
Signature methods have been widely and effectively used as a tool for feature extraction in statistical learning methods, notably in mathematical finance. They lack, however, interpretability: in the general case, it is unclear why…
In this article, we consider a 2 factors-model for pricing defaultable bond with discrete default intensity and barrier where the 2 factors are stochastic risk free short rate process and firm value process. We assume that the default event…
In this article, we analyze two modeling approaches for the pricing of derivative contracts on a commodity index. The first one is a microscopic approach, where the components of the index are modeled individually, and the index price is…
This article deals with the problem of optimal allocation of capital to corporate bonds in fixed income portfolios when there is the possibility of correlated defaults. Under fairly general assumptions for the distribution of the total net…
Predicting the exit (e.g. bankrupt, acquisition, etc.) of privately held companies is a current and relevant problem for investment firms. The difficulty of the problem stems from the lack of reliable, quantitative and publicly available…
This paper considers the problem of measuring the credit risk in portfolios of loans, bonds, and other instruments subject to possible default under multi-factor models. Due to the amount of the portfolio, the heterogeneous effect of…
We propose a novel credit default model that takes into account the impact of macroeconomic information and contagion effect on the defaults of obligors. We use a set-valued Markov chain to model the default process, which is the set of all…
The electronic platform has been increasingly popular for executing large corporate bond orders by asset managers, who in turn have to assess the quality of their executions via Transaction Cost Analysis (TCA). One of the challenges in TCA…
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…
We consider a one-dimensional multi-orbital Kondo lattice model and show that by tuning the kinetic energy of the itinerant electrons it is possible to stabilize Kondo insulators with non-trivial spin physics. In particular, depending on…
The robust option pricing problem is to find upper and lower bounds on fair prices of financial claims using only the most minimal assumptions. It contrasts with the classical, model-based approach and gained prominence in the wake of the…
We study a discrete-time consumption-based capital asset pricing model under expectations-based reference-dependent preferences. More precisely, we consider an endowment economy populated by a representative agent who derives utility from…
We develop a framework for price-mediated contagion in financial systems where banks are forced to liquidate assets to satisfy a risk-weight based capital adequacy requirement. In constructing this modeling framework, we introduce a…
In this paper, we establish a market model for the term structure of forward inflation rates based on the risk-neutral dynamics of nominal and real zero-coupon bonds. Under the market model, we can price inflation caplets as well as…
This papers addresses the stock option pricing problem in a continuous time market model where there are two stochastic tradable assets, and one of them is selected as a num\'eraire. It is shown that the presence of arbitrarily small…
Computational efficiency is essential for enhancing the accuracy and practicality of pricing complex financial derivatives. In this paper, we discuss Isogeometric Analysis (IGA) for valuing financial derivatives, modeled by two nonlinear…
Agricultural commodity futures are often settled by delivery. Quality options that allow the futures short to deliver one of several underlying assets are commonly used in such contracts to prevent manipulation. Inclusion of these options…
This paper investigates market-consistent valuation of insurance liabilities in the context of, for instance, Solvency II and to some extent IFRS 4. We propose an explicit and consistent framework for the valuation of insurance liabilities…