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We consider a financial market with zero-coupon bonds that are exposed to credit and liquidity risk. We revisit the famous Jarrow & Turnbull setting in order to account for these two intricately intertwined risk types. We utilise the…
We consider a market with a term structure of credit risky bonds in the single-name case. We aim at minimal assumptions extending existing results in this direction: first, the random field of forward rates is driven by a general…
A new test of a wide class of interest rate models is proposed and applied to a recently developed quantum field theoretic model and the industry standard Heath-Jarrow-Morton model. This test is independent of the volatility function unlike…
The problem of market clearing is to set a price for an item such that quantity demanded equals quantity supplied. In this work, we cast the problem of predicting clearing prices into a learning framework and use the resulting models to…
This paper studies the pricing and hedging of derivatives in frictionless and competitive, but incomplete jump-diffusion markets. A unique equivalent martingale measure (EMM) is obtained using filtration reduction to a fictitious complete…
Most products are produced and sold by supply chain networks, where an interconnected network of producers and intermediaries set prices to maximize their profits. I show that there exists a unique equilibrium in a price-setting game on a…
Global fixed income returns span across multiple maturities and economies, that is, they naturally reside on multi-dimensional data structures referred to as tensors. In contrast to standard "flat-view" multivariate models that are agnostic…
A very brief history of relative valuation in neoclassical finance since 1973 is presented, with attention to core currency issues for emerging economies. Price formation is considered in the context of hierarchical causality, with…
We present a quantitative study of the markets and models evolution across the credit crunch crisis. In particular, we focus on the fixed income market and we analyze the most relevant empirical evidences regarding the divergences between…
Bielecki and Rutkowski (2014) introduced and studied a generic nonlinear market model, which includes several risky assets, multiple funding accounts and margin accounts. In this paper, we examine the pricing and hedging of contract both…
The interbank market is considered one of the most important channels of contagion. Its network representation, where banks and claims/obligations are represented by nodes and links (respectively), has received a lot of attention in the…
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…
Recent developments in the global liberalization of equity and currency markets, coupled to advances in trading technologies, are making markets increasingly interdependent. This increased fluidity raises questions about the stability of…
For any company, multiple channels are available for reaching a population in order to market its products. Some of the most well-known channels are (a) mass media advertisement, (b) recommendations using social advertisement, and (c) viral…
The question of pricing and hedging a given contingent claim has a unique solution in a complete market framework. When some incompleteness is introduced, the problem becomes however more difficult. Several approaches have been adopted in…
To predict the future movements of stock markets, numerous studies concentrate on daily data and employ various machine learning (ML) models as benchmarks that often vary and lack standardization across different research works. This paper…
The cross-correlations between the exchange rate fluctuations of 74 currencies over the period 1995-2012 are analyzed in this paper. The eigenvalue distribution of the cross-correlation matrix exhibits a bulk which approximately matches the…
This paper provides a methodology for fast and accurate pricing of the long-dated contracts that arise as the building blocks of insurance and pension fund agreements. It applies the recursive marginal quantization (RMQ) and joint recursive…
This paper aims at solving FX market volatility modeling problem and finding the most becoming approach to this task. Validity of two competing approaches, classical econometric generalized conditional heteroscedasticity and mathematical…
The present work generalizes the analytical results of Petrikaite (2016) to a market where more than two firms interact. As a consequence, for a generic number of firms in the oligopoly model described by Janssen et al (2005), the…