Related papers: Binary Funding Impacts in Derivative Valuation
One of the most fundamental questions in quantitative finance is the existence of continuous-time diffusion models that fit market prices of a given set of options. Traditionally, one employs a mix of intuition, theoretical and empirical…
Using min-max inequality we investigate the existence of solutions and thier dependence on parameters for some second order discrete boundary value problem. The approach is based on variational methods and solutions are obtained as saddle…
We study the problem of evaluating a discrete function by adaptively querying the values of its variables until the values read uniquely determine the value of the function. Reading the value of a variable is done at the expense of some…
We consider derivatives written on multiple underlyings in a one-period financial market, and we are interested in the computation of model-free upper and lower bounds for their arbitrage-free prices. We work in a completely realistic…
In this paper we investigate the relationship between Funding Value Adjustment (FVA) and Net Stable Funding Ratio (NSFR). FVA is defined in a consistent way with NSFR such that the new framework of FVA monitors the costs due to keeping NSFR…
We consider a general path-dependent version of the hedging problem with price impact of Bouchard et al. (2019), in which a dual formulation for the super-hedging price is obtained by means of PDE arguments, in a Markovian setting and under…
The purpose of this work is to explore the role that arbitrage opportunities play in pricing financial derivatives. We use a non-equilibrium model to set up a stochastic portfolio, and for the random arbitrage return, we choose a stationary…
In the information system research, a question of particular interest is to interpret and to predict the probability of a firm to adopt a new technology such that market promotions are targeted to only those firms that were more likely to…
Foreign exchange and credit derivatives increase the bank's contributions to systemic risk. Interest rate derivatives decrease it. The proportion of non-performing loans over total loans and the leverage ratio have stronger impact on…
Why do companies choose particular capital structures? A compelling answer to this question remains elusive despite extensive research. In this article, we use double machine learning to examine the heterogeneous causal effect of credit…
The aim of this article is to provide a systematic analysis of the conditions such that Fourier transform valuation formulas are valid in a general framework; i.e. when the option has an arbitrary payoff function and depends on the path of…
This paper deals with two-sided matching market with two disjoint sets, i.e. the set of buyers and the set of sellers. Each seller can trade with at most with one buyer and vice versa. Money is transferred from sellers to buyers for an…
We derive the arbitrage gains or, equivalently, Loss Versus Rebalancing (LVR) for arbitrage between \textit{two imperfectly liquid} markets, extending prior work that assumes the existence of an infinitely liquid reference market. Our…
The objective of this paper is to provide a comprehensive study no-arbitrage pricing of financial derivatives in the presence of funding costs, the counterparty credit risk and market frictions affecting the trading mechanism, such as…
How do supply and demand from informed traders drive market prices of bitcoin options? Deribit options tick-level data supports the limits-to-arbitrage hypothesis about the market maker's supply. The main demand-side effects are that…
This article introduces a new mathematical concept of illiquidity that goes hand in hand with credit risk. The concept is not volume- but constraint-based, i.e., certain assets cannot be shorted and are ineligible as num\'eraire. If those…
We introduce two quantum algorithms to compute the Value at Risk (VaR) and Conditional Value at Risk (CVaR) of financial derivatives using quantum computers: the first by applying existing ideas from quantum risk analysis to derivative…
In the conventional regression-discontinuity (RD) design, the probability that units receive a treatment changes discontinuously as a function of one covariate exceeding a threshold or cutoff point. This paper studies an extended RD design…
Financial decisions are the decisions that managers take with regard to the finances of a company. This article aims to examine and explain the effect of interest rates on economic and financial decisions such as investment, funding, and…
We analyse derivative securities whose value is NOT a deterministic function of an underlying which means presence of a basis risk at any time. The key object of our analysis is conditional probability distribution at a given underlying…