Related papers: Deriving Derivatives
Quality-designed consumer products are easy to recognize. Wouldn't it be great if the quality of financial products became just as apparent? This paper is addressed to financial practitioners. It provides an informal introduction to…
The recent crisis and the following flight to simplicity put most derivative businesses around the world under considerable pressure. We argue that the traditional modeling techniques must be extended to include product design. We propose a…
"What are the origins of risks?" and "How material are they?" -- these are the two most fundamental questions of any risk analysis. Quantitative Structuring -- a technology for building financial products -- provides economically meaningful…
Financial derivatives have often been criticized as casino-style betting instruments. It turns out that many naive ways of making them are indeed equivalent to gambling. Fortunately, this inadvertent effect can be understood and prevented.…
A derivative is a financial security whose value is a function of underlying traded assets and market outcomes. Pricing a financial derivative involves setting up a market model, finding a martingale (``fair game") probability measure for…
Qualitative modelling is a technique integrating the fields of theoretical computer science, artificial intelligence and the physical and biological sciences. The aim is to be able to model the behaviour of systems without estimating…
Financial derivatives are contracts that can have a complex payoff dependent upon underlying benchmark assets. In this work, we present a quantum algorithm for the Monte Carlo pricing of financial derivatives. We show how the relevant…
When developing a safety-critical system it is essential to obtain an assessment of different design alternatives. In particular, an early safety assessment of the architectural design of a system is desirable. In spite of the plethora of…
Quantitative aspects of computation are important and sometimes essential in characterising the behavior and determining the properties of systems. They are related to the use of physical quantities (storage space, time, bandwidth, etc.) as…
We provide a framework for compositional and iterative design and verification of systems with quantitative information, such as rewards, time or energy. It is based on disjunctive modal transition systems where we allow actions to bear…
Secure software architecture is increasingly important in a data-driven world. When security is neglected sensitive information might leak through unauthorized access. To mitigate this software architects needs tools and methods to quantify…
Software repositories are rich sources of qualitative artifacts, including source code comments, commit messages, issue descriptions, and documentation. These artifacts offer many interesting insights when analyzed through quantitative…
A common assumption in financial engineering is that the market price for any derivative coincides with an objectively defined risk-neutral price - a plausible assumption only if traders collectively possess objective knowledge about the…
Reliable predictions of the behaviour of chemical systems are essential across many industries, from nanoscale engineering over validation of advanced materials to nanotoxicity assessment in health and medicine. For the future we therefore…
Financial structures such as securitisations, insurance contracts, and other hierarchical claims systems can be interpreted as deterministic allocation mechanisms acting on stochastic inflow processes. This paper develops a general…
Stablecoins promise to bridge fiat currencies with the world of cryptocurrencies. They provide a way for users to take advantage of the benefits of digital currencies, such as ability to transfer assets over the internet, provide assurance…
Quantum computers can solve specific problems that are not feasible on "classical" hardware. Harvesting the speed-up provided by quantum computers therefore has the potential to change any industry which uses computation, including finance.…
A new chaotic financial system is proposed by considering ethics involvement in a four-dimensional financial system with market confidence. A five-dimensional conformable derivative financial system is presented by introducing conformable…
Derivative pricing is about cash flow discounting at the riskfree rate. This teaching has lost its meaning post the financial crisis, due to the addition of extra value adjustments (XVA), which also made derivatives pricing and valuation a…
We present quantitative probing as a model-agnostic framework for validating causal models in the presence of quantitative domain knowledge. The method is constructed as an analogue of the train/test split in correlation-based machine…