Related papers: A heuristic pricing and hedging framework for mult…
We investigate the optimal execution of contracts that are used in merger\&acquisition deals. We consider cash-settled and physically delivered contracts between a broker and a counterpart. Contracts are linear (total returns swaps),…
The rapid development and deployment of vehicle technologies offer opportunities to re-think the way traffic is managed. This paper capitalizes on vehicle connectivity and proposes an economic instrument and corresponding cooperative…
We develop quantum algorithms for pricing Asian and barrier options under the Heston model, a popular stochastic volatility model, and estimate their costs, in terms of T-count, T-depth and number of logical qubits, on instances under…
This article presents a generic hybrid numerical method to price a wide range of options on one or several assets, as well as assets with stochastic drift or volatility. In particular for equity and interest rate hybrid with local…
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…
Paper is based on "The cost of illiquidity and its effects on hedging", L. C. G. Rogers and Surbjeet Singh, 2010. We generalize its thesis to constant elasticity model, which own previously used Black-Schoels model as a special case. The…
We consider the problem of hedging a European contingent claim in a Bachelier model with transient price impact as proposed by Almgren and Chriss. Following the approach of Rogers and Singh and Naujokat and Westray, the hedging problem can…
We derive valuations of a portfolio of financial instruments from a securities lending perspective, under different assumptions, and show a weighting scheme that converges to the true valuation. We illustrate conditions under which our…
We study the loan contracts offered by decentralised loan protocols (DLPs) through the lens of financial derivatives. DLPs, which effectively are clearinghouses, facilitate transactions between option buyers (i.e. borrowers) and option…
The financial crisis of 2007/08 caused catastrophic consequences and brought a bunch of changes around the world. Interest rates that were known to follow or behave similarly of each other diverged. Furthermore, the regulation and in…
In this paper, the valuation of European and path-dependent options in foreign exchange (FX) markets is considered when the currency exchange rate evolves according to the Heston model combined with the Cox-Ingersoll-Ross dynamics for the…
Neural networks have been used as a nonparametric method for option pricing and hedging since the early 1990s. Far over a hundred papers have been published on this topic. This note intends to provide a comprehensive review. Papers are…
Short-horizon option book management relies on P&L expansions in a small set of risk factors. In practice, the quadratic term and common desk adjustments (smile corrections, execution cost add-ons) depend on the chosen factor coordinates,…
In this paper, we introduce two novel methods to solve the American-style option pricing problem and its dual form at the same time using neural networks. Without applying nested Monte Carlo, the first method uses a series of neural…
Risk assessment and in particular derivatives pricing is one of the core areas in computational finance and accounts for a sizeable fraction of the global computing resources of the financial industry. We outline a quantum-inspired…
In this paper we study the pricing of exchange options under a dynamic described by stochastic correlation with random jumps. In particular, we consider a Ornstein-Uhlenbeck covariance model with Levy Background Noise Process driven by…
We consider rate swaps which pay a fixed rate against a floating rate in presence of bid-ask spread costs. Even for simple models of bid-ask spread costs, there is no explicit strategy optimizing an expected function of the hedging error.…
We develop a robust framework for pricing and hedging of derivative securities in discrete-time financial markets. We consider markets with both dynamically and statically traded assets and make minimal measurability assumptions. We obtain…
This paper presents the implementation of an advanced artificial intelligence-based algorithmic trading system specifically designed for the EUR-USD pair within the high-frequency environment of the Forex market. The methodological approach…
In this paper we derive robust super- and subhedging dualities for contingent claims that can depend on several underlying assets. In addition to strict super- and subhedging, we also consider relaxed versions which, instead of eliminating…