Related papers: VIX-linked fees for GMWBs via Explicit Solution Si…
Using a suitable change of probability measure, we obtain a novel Poisson series representation for the arbitrage- free price process of vulnerable contingent claims in a regime-switching market driven by an underlying continuous- time…
We introduce a new tool for predicting the evolution of an option for the cases where at some specific time, there is a high-degree of uncertainty for identifying its price. We work over the special case where we can predict the evolution…
In this paper we formulate a regression problem to predict realized volatility by using option price data and enhance VIX-styled volatility indices' predictability and liquidity. We test algorithms including regularized regression and…
Several well-established benchmark predictors exist for Value-at-Risk (VaR), a major instrument for financial risk management. Hybrid methods combining AR-GARCH filtering with skewed-$t$ residuals and the extreme value theory-based approach…
In this paper, we consider the nonconvex minimization problem of the value-at-risk (VaR) that arises from financial risk analysis. By considering this problem as a special linear program with linear complementarity constraints (a bilevel…
This paper proposes a hybrid credit risk model, in closed form, to price vulnerable options with stochastic volatility. The distinctive features of the model are threefold. First, both the underlying and the option issuer's assets follow…
We study two complementary methodologies for calibrating implied volatility surfaces: analytical approximations and data-driven models based on rough path theory. On the analytical side, we revisit a second-order asymptotic expansion for…
In this paper we propose a novel methodology that allows to design, in a purely data-based fashion and for linear single-input and single-output systems, both robustly stable and performing control systems for tracking piecewise constant…
Predicting the S&P 500 index volatility is crucial for investors and financial analysts as it helps assess market risk and make informed investment decisions. Volatility represents the level of uncertainty or risk related to the size of…
In this paper we provide evidence that financial option markets for equity indices give rise to non-trivial dependency structures between its constituents. Thus, if the individual constituent distributions of an equity index are inferred…
We develop robust pricing and hedging of a weighted variance swap when market prices for a finite number of co--maturing put options are given. We assume the given prices do not admit arbitrage and deduce no-arbitrage bounds on the weighted…
We discuss the pricing methodology for Bonus Certificates and Barrier Reverse-Convertible Structured Products. Pricing for a European barrier condition is straightforward for products of both types and depends on an efficient interpolation…
In this paper, we propose a novel methodology for pricing equity-indexed annuities featuring cliquet-style payoff structures and early surrender risk, using advanced financial modeling techniques. Specifically, the market is modeled by an…
This paper considers liquidity as an explanation for the positive association between expected idiosyncratic volatility (IV) and expected stock returns. Liquidity costs may affect the stock returns, through bid-ask bounce and other…
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…
This paper investigates calculations of robust funding valuation adjustment (FVA) for over the counter (OTC) derivatives under distributional uncertainty using Wasserstein distance as the ambiguity measure. Wrong way funding risk can be…
We consider an optimal investment and risk control problem for an insurer under the mean-variance (MV) criterion. By introducing a deterministic auxiliary process defined forward in time, we formulate an alternative time-consistent problem…
We describe and analyze a variance reduction approach for Monte Carlo (MC) sampling that accelerates the estimation of statistics of computationally expensive simulation models using an ensemble of models with lower cost. These lower cost…
In this note, we develop stock option price approximations for a model which takes both the risk o default and the stochastic volatility into account. We also let the intensity of defaults be influenced by the volatility. We show that it…
Prize linked savings accounts provide a return in the form of randomly chosen accounts receiving large cash prizes, in lieu of a guaranteed and uniform interest rate. This model became legal for American national banks upon bipartisan…