Related papers: Valuing FtD Contract under Copula Approach via Mon…
The research presented in this work is motivated by some recent papers regarding hedging and valuation of financial securities subject to funding costs, collateralization and counterparty credit risk. Our goal is to provide a sound…
We propose a dependence-aware predictive modeling framework for multivariate risks stemmed from an insurance contract with bundling features - an important type of policy increasingly offered by major insurance companies. The bundling…
Auction-based Federated Learning (AFL) enables open collaboration among self-interested data consumers and data owners. Existing AFL approaches are commonly under the assumption of sellers' market in that the service clients as sellers are…
This paper examines the problem of pricing spread options under some models with jumps driven by Compound Poisson Processes and stochastic volatilities in the form of Cox-Ingersoll-Ross(CIR) processes. We derive the characteristic function…
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…
This paper presents a method for fitting a copula-driven generalized linear mixed models. For added flexibility, the skew-normal copula is adopted for fitting. The correlation matrix of the skew-normal copula is used to capture the…
Utility based methods provide a very general theoretically consistent approach to pricing and hedging of securities in incomplete financial markets. Solving problems in the utility based framework typically involves dynamic programming,…
In this paper we develop a tractable structural model with analytical default probabilities depending on some dynamics parameters, and we show how to calibrate the model using a chosen number of Credit Default Swap (CDS) market quotes. We…
This paper proposes a Monte Carlo technique for pricing the forward yield to maturity, when the volatility of the zero-coupon bond is known. We make the assumption of deterministic default intensity (Hazard Rate Function). We make no…
We discuss various analytic and numerical methods that have been used to get option prices within a framework of the VG model. We show that some popular methods, for instance, Carr-Madan's FFT method could blow up for certain values of the…
In this paper, we study large losses arising from defaults of a credit portfolio. We assume that the portfolio dependence structure is modelled by the Archimedean copula family as opposed to the widely used Gaussian copula. The resulting…
Federated learning (FL) is a paradigm that allows distributed clients to learn a shared machine learning model without sharing their sensitive training data. While largely decentralized, FL requires resources to fund a central orchestrator…
Cumulative Prospect Theory (CPT) is a modeling tool widely used in behavioral economics and cognitive psychology that captures subjective decision making of individuals under risk or uncertainty. In this paper, we propose a dynamic pricing…
Though federated learning (FL) well preserves clients' data privacy, many clients are still reluctant to join FL given the communication cost and energy consumption in their mobile devices. It is important to design pricing compensations to…
We introduce a new numerical approximation method for functionals of factor credit portfolio models based on the theory of mod-$\phi$ convergence and mod-$\phi$ approximation schemes. The method can be understood as providing correction…
Improved bounds on the copula of a bivariate random vector are computed when partial information is available, such as the values of the copula on a given subset of $[0,1]^2$, or the value of a functional of the copula, monotone with…
We present the method of moments approach to pricing barrier-type options when the underlying is modelled by a general class of jump diffusions. By general principles the option prices are linked to certain infinite dimensional linear…
We propose a versatile Monte-Carlo method for pricing and hedging options when the market is incomplete, for an arbitrary risk criterion (chosen here to be the expected shortfall), for a large class of stochastic processes, and in the…
Gaussian copulas are widely used in the industry to correlate two random variables when there is no prior knowledge about the co-dependence between them. The perturbed Gaussian copula approach allows introducing the skew information of both…
We propose a new model for pricing Quanto CDS and risky bonds. The model operates with four stochastic factors, namely: hazard rate, foreign exchange rate, domestic interest rate, and foreign interest rate, and also allows for…