Related papers: A General Framework for the Benchmark pricing in a…
Valuation adjustments are nowadays a common practice to include credit and liquidity effects in option pricing. Funding costs arising from collateral procedures, hedging strategies and taxes are added to option prices to take into account…
Continuous time financial market models are often motivated as scaling limits of discrete time models. The objective of this paper is to establish such a connection for a robust framework. More specifically, we consider discrete time models…
The increasing penetration of renewable energy in recent years has led to more uncertainties in power systems. These uncertainties have to be accommodated by flexible re- sources (i.e. upward and downward generation reserves). In this…
Trading on the day-ahead electricity markets requires accurate information about the realization of electricity prices and the uncertainty attached to the predictions. Deriving accurate forecasting models presents a difficult task due to…
Recurring international financial crises have adverse socioeconomic effects and demand novel regulatory instruments or strategies for risk management and market stabilization. However, the complex web of market interactions often impedes…
Within this work we consider an axiomatic framework for Automated Market Makers (AMMs). AMMs are smart contracts that set prices for swaps on a pool of assets. By imposing reasonable axioms on the underlying utility function, we are able to…
Constant function market makers (CFMMs) are the most popular type of decentralized trading venue for cryptocurrency tokens. In this paper, we give a very general geometric framework (or 'axioms') which encompass and generalize many of the…
Large language models (LLMs) have emerged as powerful tools in the field of finance, particularly for risk management across different asset classes. In this work, we introduce a Cross-Asset Risk Management framework that utilizes LLMs to…
Trading a financial asset pushes its price as well as the prices of other assets, a phenomenon known as cross-impact. We consider a general class of kernel-based cross-impact models and investigate suitable parameterisations for trading…
The rise of the machine learning (ML) model economy has intertwined markets for training datasets and pre-trained models. However, most pricing approaches still separate data and model transactions or rely on broker-centric pipelines that…
In this paper we develop a framework for discretely compounding interest rates which is based on the forward price process approach. This approach has a number of advantages, in particular in the current market environment. Compared to the…
In decentralized finance, any individual can pool their assets into an automated market maker (AMM) -- herein we focus on the constant product market maker (CPMM) -- in exchange for a claim on a fraction of future pool assets and fees…
We present a dialogue on Funding Costs and Counterparty Credit Risk modeling, inclusive of collateral, wrong way risk, gap risk and possible Central Clearing implementation through CCPs. This framework is important following the fact that…
Closed form formulas for swaption prices in HJM model are derived. These formulas are used for nonparametric fit of deterministic forward volatility. It is demonstrated that this formula and non-parametric fit works very well and can be…
In order to overcome the drawbacks of assuming deterministic volatility coefficients in the standard LIBOR market models to capture volatility smiles and skews in real markets, several extensions of LIBOR models to incorporate stochastic…
In this article we derive partial differential equations (PDEs) for pricing interest rate derivatives under the generalized Forward Market Model (FMM) recently presented by A. Lyashenko and F. Mercurio in \cite{lyashenkoMercurio:Mar2019} to…
Developments in finance industry and academic research has led to innovative financial products. This paper presents an alternative approach to price American options. Our approach utilizes famous \cite{heath1992bond} ("HJM") technique to…
We present a methodology for representing probabilistic relationships in a general-equilibrium economic model. Specifically, we define a precise mapping from a Bayesian network with binary nodes to a market price system where consumers and…
We consider the theory of bond discounts, defined as the difference between the terminal payoff of the contract and its current price. Working in the setting of finite-dimensional realizations in the HJM framework, under suitable notions of…
There exist several methods how more general options can be priced with call prices. In this article, we extend these results to cover a wider class of options and market models. In particular, we introduce a new pricing formula which can…