Related papers: To sigmoid-based functional description of the vol…
We tackle the calibration of the so-called Stochastic-Local Volatility (SLV) model. This is the class of financial models that combines the local and stochastic volatility features and has been subject of the attention by many researchers…
Based on discrete observations, we develop a test to infer if the volatility function $\sigma(\cdot)$ within the nonparametric Gaussian white noise model $dY_t = \sigma(t)dW_t$ is constant. The testing procedure is shown to be…
A variational model to simultaneously treat Stress-Driven Rearrangement Instabilities, such as boundary discontinuities, internal cracks, external filaments, edge delamination, wetting, and brittle fractures, is introduced. The model is…
We propose a penalty-based smoothing framework for convex nonsmooth functions with a supremum structure. The regularization yields a differentiable surrogate with controlled approximation error, a single-valued dual maximizer, and explicit…
In [1], we calibrated a one-factor Cheyette SLV model with a local volatility that is linear in the benchmark forward rate and an uncorrelated CIR stochastic variance to 3M caplets of various maturities. While caplet smiles for many…
Fukasawa introduced in [Fukasawa, Math Financ, 2012] two necessary conditions for no butterfly arbitrage which require that the $d_1$ and $d_2$ functions of the Black-Scholes formula have to be decreasing. In this article we characterize…
A motivating question in this paper is whether a sensible investment strategy may systematically contain long positions in out-of-the-money European calls with short expiry. Here we consider a very simple trading strategy for calls. The…
Variable projection solves structured optimization problems by completely minimizing over a subset of the variables while iterating over the remaining variables. Over the last 30 years, the technique has been widely used, with empirical and…
The calibration of a local volatility models to a given set of option prices is a classical problem of mathematical finance. It was considered in multiple papers where various solutions were proposed. In this paper an extension of the…
We investigate financial markets under model risk caused by uncertain volatilities. For this purpose we consider a financial market that features volatility uncertainty. To have a mathematical consistent framework we use the notion of…
Recently, the Shifted Boundary Method (SBM) was proposed within the class of unfitted (or immersed, or embedded) finite element methods. By reformulating the original boundary value problem over a surrogate (approximate) computational…
We consider the asymptotic behavior of the implied volatility in stochastic asset price models with atoms. In such models, the asset price distribution has a singular component at zero. Examples of models with atoms include the constant…
We construct realistic spot and equity option market simulators for a single underlying on the basis of normalizing flows. We address the high-dimensionality of market observed call prices through an arbitrage-free autoencoder that…
We develop closed-form expansions for the implied volatility of VIX options within the class of forward variance models. Our approach builds on weak-approximation techniques for VIX option prices and yields explicit implied volatility…
In this paper we introduce a variational model for the study of multilayer films that allows for the treatment of both coherent and incoherent interfaces between layers. The model is designed in the framework of the theory of Stress Driven…
We present a framework to train a structured prediction model by performing smoothing on the inference algorithm it builds upon. Smoothing overcomes the non-smoothness inherent to the maximum margin structured prediction objective, and…
A simple phenomenological approach to metal plasticity, including the description of the strain-induced plastic anisotropy, is considered. The advocated approach is exemplified by a two-dimensional rheological analogy. This analogy provides…
We revisit the foundational Moment Formula proved by Roger Lee fifteen years ago. We show that when the underlying stock price martingale admits finite log-moments E[|log(S)|^q] for some positive q, the arbitrage-free growth in the left…
In this paper we provide, first, a general symbolic algorithm for computing the symmetries of a given rational surface, based on the classical differential invariants of surfaces, i.e. Gauss curvature and mean curvature. In practice, the…
Volatility prediction--an essential concept in financial markets--has recently been addressed using sentiment analysis methods. We investigate the sentiment of annual disclosures of companies in stock markets to forecast volatility. We…