Related papers: The Multivariate Mixture Dynamics Model: Shifted d…
This paper considers mutual obligations in the interconnected bank system and analyzes their influence on joint and marginal survival probabilities as well as CDS and FTD prices for the individual banks. To make the role of mutual…
We explore a stochastic model that enables capturing external influences in two specific ways. The model allows for the expression of uncertainty in the parametrisation of the stochastic dynamics and incorporates patterns to account for…
Recent developments in financial time series focus on modeling volatility across multiple assets or indices in a multivariate framework, accounting for potential interactions such as spillover effects. Furthermore, the increasing…
Mixed membership models are an extension of finite mixture models, where each observation can partially belong to more than one mixture component. A probabilistic framework for mixed membership models of high-dimensional continuous data is…
The implied volatility skew has received relatively little attention in the literature on short-term asymptotics for financial models with jumps, despite its importance in model selection and calibration. We rectify this by providing…
We introduce a fast and flexible Machine Learning (ML) framework for pricing derivative products whose valuation depends on volatility surfaces. By parameterizing volatility surfaces with the 5-parameter stochastic volatility inspired (SVI)…
It is known that the implied volatility skew of FX options demonstrates a stochastic behavior which is called stochastic skew. In this paper we create stochastic skew by assuming the spot/instantaneous variance correlation to be stochastic.…
We provide explicit small-time formulae for the at-the-money implied volatility, skew and curvature in a large class of models, including rough volatility models and their multi-factor versions. Our general setup encompasses both European…
A simple graphical model for correlated defaults is proposed, with explicit formulas for the loss distribution. Algebraic geometry techniques are employed to show that this model is well posed for default dependence: it represents any given…
We present a multivariate stochastic volatility model with leverage, which is flexible enough to recapture the individual dynamics as well as the interdependencies between several assets while still being highly analytically tractable.…
Markov switching models are often used to analyze financial returns because of their ability to capture frequently observed stylized facts. In this paper we consider a multivariate Student-t version of the model as a viable alternative to…
Reliable estimation of feature contributions in machine learning models is essential for trust, transparency and regulatory compliance, especially when models are proprietary or otherwise operate as black boxes. While permutation-based…
Large tick assets, i.e. assets where one tick movement is a significant fraction of the price and bid-ask spread is almost always equal to one tick, display a dynamics in which price changes and spread are strongly coupled. We introduce a…
We present a numerically efficient approach for learning a risk-neutral measure for paths of simulated spot and option prices up to a finite horizon under convex transaction costs and convex trading constraints. This approach can then be…
It is essential to incorporate the impact of investor behavior when modeling the dynamics of asset returns. In this paper, we reconcile behavioral finance and rational finance by incorporating investor behavior within the framework of…
It is well know that, in the short maturity limit, the implied volatility approaches the integral harmonic mean of the local volatility with respect to log-strike, see [Berestycki et al., Asymptotics and calibration of local volatility…
We study the shapes of the implied volatility when the underlying distribution has an atom at zero and analyse the impact of a mass at zero on at-the-money implied volatility and the overall level of the smile. We further show that the…
Developing effective multimodal fusion approaches has become increasingly essential in many real-world scenarios, such as health care and finance. The key challenge is how to preserve the feature expressiveness in each modality while…
Finite mixture models are useful in applied econometrics. They can be used to model unobserved heterogeneity, which plays major roles in labor economics, industrial organization and other fields. Mixtures are also convenient in dealing with…
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…