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For a smooth irreducible affine algebraic variety we study a class of gauge modules admitting compatible actions of both the algebra $A$ of functions and the Lie algebra $\mathcal{V}$ of vector fields on the variety. We prove that a gauge…
Machine learning models are extensively being used to make decisions that have a significant impact on human life. These models are trained over historical data that may contain information about sensitive attributes such as race, sex,…
Invariant affine reflection algebras are the last and the most general known extension of affine Kac-Moody Lie algebras, introduced in recent years. We develop a method known as "affinization" to the class of invariant affine reflection…
In this paper we develop a novel neural network model for predicting implied volatility surface. Prior financial domain knowledge is taken into account. A new activation function that incorporates volatility smile is proposed, which is used…
We provide explicit conditions on the distribution of risk-neutral log-returns which yield sharp asymptotic estimates on the implied volatility smile. We allow for a variety of asymptotic regimes, including both small maturity (with…
We study a Markov-Functional (MF) interest-rate model with Uncertain Volatility Displaced Diffusion (UVDD) digital mapping, which is consistent with the volatility-smile phenomenon observed in the option market. We first check the impact of…
We introduce a class of Markov processes, called $m$-polynomial, for which the calculation of (mixed) moments up to order $m$ only requires the computation of matrix exponentials. This class contains affine processes, processes with…
The LIBOR rate is currently scheduled for discontinuation, and the replacement advocated by regulators in the US is the Secured Overnight Financing Rate (SOFR). The change has the potential to disrupt the $200 trillion market of derivatives…
Standard diffusion models involve an image transform -- adding Gaussian noise -- and an image restoration operator that inverts this degradation. We observe that the generative behavior of diffusion models is not strongly dependent on the…
Discount is the difference between the face value of a bond and its present value. I propose an arbitrage-free dynamic framework for discount models, which provides an alternative to the Heath--Jarrow--Morton framework for forward rates. I…
In this paper, we derive a general asymptotic implied volatility at the first-order for any stochastic volatility model using the heat kernel expansion on a Riemann manifold endowed with an Abelian connection. This formula is particularly…
The elementary affine lambda-calculus was introduced as a polyvalent setting for implicit computational complexity, allowing for characterizations of polynomial time and hyperexponential time predicates. But these results rely on type…
Identifying control-friendly models of nonlinear systems remains one of the major challenges at the intersection of system identification and control. The Linear Parameter-Varying (LPV) framework offers a promising solution, but existing…
This paper studies the model risk of the Black-Scholes (BS) model in pricing and risk-managing variable annuities motivated by its wide usage in the insurance industry. Specifically, we derive a model-free decomposition of the no-arbitrage…
Invariance with respect to linear or affine transformations of the domain is arguably the most common symmetry exhibited by natural algebraic properties. In this work, we show that any low complexity affine-invariant property of…
We extend the fundamental theorem of asset pricing to a model where the risky stock is subject to proportional transaction costs in the form of bid-ask spreads and the bank account has different interest rates for borrowing and lending. We…
We formulate a forward inflation index model with multi-factor volatility structure featuring a parametric form that allows calibration to correlations between indices of different tenors observed in the market. Assuming the nominal…
Given a connected non-negative unit form we construct an extended affine Lie algebra by giving a Chevalley basis for it. We also obtain this algebra as a quotient of an algebra defined by means of generalized Serre relations by M. Barot, D.…
The paper extends core results of behavioral systems theory from linear to affine time-invariant systems. We characterize the behavior of affine time-invariant systems via kernel, input-output, state-space, and finite-horizon data-driven…
We provide a full characterisation of the large-maturity forward implied volatility smile in the Heston model. Although the leading decay is provided by a fairly classical large deviations behaviour, the algebraic expansion providing the…