Related papers: How to hedge extrapolated yield curves
In order to improve the advantages and the reliability of the second derivative method in tracking the position of extrema from experimental curves, we develop a novel analysis method based on the mathematical concept of curvature. We…
Over the last decade, dividends have become a standalone asset class instead of a mere side product of an equity investment. We introduce a framework based on polynomial jump-diffusions to jointly price the term structures of dividends and…
We introduce a new method to calculate the credit exposure of Bermudan, discretely monitored barrier and European options. Core of the approach is the application of the dynamic Chebyshev method of Glau et al. (2019). The dynamic Chebyshev…
The paper derives saddlepoint expansions for conditional expectations in the form of $\mathsf{E}[\overline{X} | \overline{\mathbf Y} = {\mathbf a}]$ and $\mathsf{E}[\overline{X} | \overline{\mathbf Y} \geq {\mathbf a}]$ for the sample mean…
In this work we develop a dynamically adaptive sparse grids (SG) method for quasi-optimal interpolation of multidimensional analytic functions defined over a product of one dimensional bounded domains. The goal of such approach is to…
For uncertainty propagation of highly complex and/or nonlinear problems, one must resort to sample-based non-intrusive approaches [1]. In such cases, minimizing the number of function evaluations required to evaluate the response surface is…
We price and replicate a variety of claims written on the log price $X$ and quadratic variation $[X]$ of a risky asset, modeled as a positive semimartingale, subject to stochastic volatility and jumps. The pricing and hedging formulas do…
A method based on orthogonal function series interpolation of the square root probability density to analyze higher dimensional scattered data is presented. The method is targeted for the use-case when the model and/or data are available…
In this work, we develop a novel efficient quadrature and sparse grid based polynomial interpolation method to price American options with multiple underlying assets. The approach is based on first formulating the pricing of American…
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 develop a methodology for index tracking and risk exposure control using financial derivatives. Under a continuous-time diffusion framework for price evolution, we present a pathwise approach to construct dynamic portfolios of…
We propose to augment standard grid-based fluid solvers with pointwise divergence-free velocity interpolation, thereby ensuring exact incompressibility down to the sub-cell level. Our method takes as input a discretely divergence-free…
Penalized spline regression is a popular method for scatterplot smoothing, but there has long been a debate on how to construct confidence intervals for penalized spline fits. Due to the penalty, the fitted smooth curve is a biased estimate…
This paper offers a new class of models of the term structure of interest rates. We allow each instantaneous forward rate to be driven by a different stochastic shock, constrained in such a way as to keep the forward rate curve continuous.…
Deep hedging is a framework for hedging derivatives in the presence of market frictions. In this study, we focus on the problem of hedging a given target option by using multiple options. To extend the deep hedging framework to this…
We consider variational problems that model the bending behavior of curves that are constrained to belong to given hypersurfaces. Finite element discretizations of corresponding functionals are justified rigorously via Gamma-convergence.…
The weighted extended B-spline method [Hoellig (2003)] is applied to bending and buckling problems of plates with different shapes and stiffener arrangements. The discrete equations are obtained from the energy contributions of the…
In computational materials science, predicting the yield strain of crosslinked polymers remains a challenging task. A common approach is to identify yield as the first critical point of stress-strain curves simulated by molecular dynamics…
We present a semi-static hedging algorithm for callable interest rate derivatives under an affine, multi-factor term-structure model. With a traditional dynamic hedge, the replication portfolio needs to be updated continuously through time…
In the present work, we study how to develop an efficient solver for the fast resolution of large and sparse linear systems that occur while discretizing elliptic partial differential equations using isogeometric analysis. Our new approach…