Related papers: A Bond Consistent Derivative Fair Value

Tackling climate change is at the top of many agendas. In this context, emission trading schemes are considered as promising tools. The regulatory framework for an emission trading scheme introduces a market for emission allowances and…

The X-valuation adjustment (XVA) problem, which is a recent topic in mathematical finance, is considered and analyzed. First, the basic properties of backward stochastic differential equations (BSDEs) with a random horizon in a…

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…

It is well documented that a model for the underlying asset price process that seeks to capture the behaviour of the market prices of vanilla options needs to exhibit both diffusion and jump features. In this paper we assume that the asset…

The standard approach for compensating liquidity providers on many decentralized exchanges (DEX) for serving as counter-party to swaps is through charging a small percentage of fees. The expected payoff from the cash flow of this mode of…

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…

In this paper, we study the pricing of contracts in fixed income markets under volatility uncertainty in the sense of Knightian uncertainty or model uncertainty. The starting point is an arbitrage-free bond market under volatility…

This paper presents a convenient framework for modeling default process and pricing derivative securities involving credit risk. The framework provides an integrated view of credit valuation adjustment by linking distance-to-default,…

We consider the pricing of derivatives written on the discretely sampled realized variance of an underlying security. In the literature, the realized variance is usually approximated by its continuous-time limit, the quadratic variation of…

Travel time derivatives are financial instruments that derive their value from road travel times, serving as an underlying asset that cannot be directly traded. Within the transportation domain, these derivatives are proposed as a more…

The importance of counterparty credit risk to the derivative contracts was demonstrated consistently throughout the financial crisis of 2008. Accurate valuation of Credit value adjustment (CVA) is essential to reflect the economic values of…

The study is conducted to establish the framework for comparing the relation in performance of the derivatives of BSE and NSE in India and to analyse the relationship of derivatives with the cash market and the market volatility. The…

Credit (CVA), Debit (DVA) and Funding Valuation Adjustments (FVA) are now familiar valuation adjustments made to the value of a portfolio of derivatives to account for credit risks and funding costs. However, recent changes in the…

As markets have digitized, the number of tradable products has skyrocketed. Algorithmically constructed portfolios of these assets now dominate public and private markets, resulting in a combinatorial explosion of tradable assets. In this…

After the beginning of the credit and liquidity crisis, financial institutions have been considering creating a convertible-bond type contract focusing on Capital. Under the terms of this contract, a bond is converted into equity if the…

We introduce a novel class of credit risk models in which the drift of the survival process of a firm is a linear function of the factors. The prices of defaultable bonds and credit default swaps (CDS) are linear-rational in the factors.…

We develop a unified valuation theory that incorporates credit risk (defaults), collateralization and funding costs, by expanding the replication approach to a generality that has not yet been studied previously and reaching valuation when…

Pricing a multi-asset derivative is an important problem in financial engineering, both theoretically and practically. Although it is suitable to numerically solve partial differential equations to calculate the prices of certain types of…

Quantitative structuring is a rigorous framework for the design of financial products. We show how it incorporates traditional investment ideas while supporting a more accurate expression of clients' views. We touch upon adjacent topics…

Before the 2008 financial crisis, most research in financial mathematics focused on pricing options without considering the effects of counterparties' defaults, illiquidity problems, and the role of the sale and repurchase agreement (Repo)…