Related papers: Pricing sovereign contingent convertible debt
The role of collateral in derivative pricing has evolved beyond credit risk mitigation, particularly following the global financial crisis, when funding costs and basis spreads became central to valuation practices. This development…
We propose an extension of the Cox-Ross-Rubinstein (CRR) model based on $q$-binomial (or Kemp) random walks, with application to default with logistic failure rates. This model allows us to consider time-dependent switching probabilities…
Sampling from unnormalized multimodal distributions with limited density evaluations remains a fundamental challenge in machine learning and natural sciences. Successful approaches construct a bridge between a tractable reference and the…
Spot option prices, forwards and options on forwards relevant for the commodity markets are computed when the underlying process S is modelled as an exponential of a process {\xi} with memory as e.g. a L\'evy semi-stationary process.…
We extend the scheme developed in B. D\"uring, A. Pitkin, "High-order compact finite difference scheme for option pricing in stochastic volatility jump models", 2019, to the so-called stochastic volatility with contemporaneous jumps (SVCJ)…
We present here a regress later based Monte Carlo approach that uses neural networks for pricing high-dimensional contingent claims. The choice of specific architecture of the neural networks used in the proposed algorithm provides for…
A multi-dimensional extension of the structural default model with firms' values driven by diffusion processes with Marshall-Olkin-inspired correlation structure is presented. Semi-analytical methods for solving the forward calibration…
This paper describes a consistent and arbitrage-free pricing methodology for bespoke CDO tranches. The proposed method is a multi-factor extension to the (Li 2009) model, and it is free of the known flaws in the current standard pricing…
We study the dynamic pricing problem faced by a monopolistic retailer who sells a storable product to forward-looking consumers. In this framework, the two major pricing policies (or mechanisms) studied in the literature are the…
We propose a state-space model (SSM) for commodity prices that combines the competitive storage model with a stochastic trend. This approach fits into the economic rationality of storage decisions, and adds to previous deterministic trend…
Persistent shifts in term-structure dynamics undermine the stability of single-regime models in long samples. We develop an arbitrage-free regime-switching generalized CIR (RS-GCIR) model that jointly prices the Chinese government bond…
In this paper we study dynamic pricing mechanisms of financial derivatives. A typical model of such pricing mechanism is the so-called g--expectation defined by solutions of a backward stochastic differential equation with g as its…
We present an arbitrage free theoretical framework for modeling bid and ask prices of dividend paying securities in a discrete time setup using theory of dynamic acceptability indices. In the first part of the paper we develop the theory of…
Synchronous Generators (SGs) currently provide important levels of Short-Circuit Current (SCC), a critical ancillary service that ensures line protections trip during short-circuit faults. Given the ongoing replacement of SGs by…
While ex-ante screening and static price caps are global standards for mitigating price volatility, Singapore's electricity market employs a unique dual-defense mechanism integrating vesting contracts (VC) with a temporary price cap (TPC).…
We provide analytical pricing formula of corporate defaultable bond with both expected and unexpected default in the case with stochastic default intensity. In the case with constant short rate and exogenous default recovery using PDE…
This papers addresses the stock option pricing problem in a continuous time market model where there are two stochastic tradable assets, and one of them is selected as a num\'eraire. It is shown that the presence of arbitrarily small…
In this paper we present a theoretical framework for determining dynamic ask and bid prices of derivatives using the theory of dynamic coherent acceptability indices in discrete time. We prove a version of the First Fundamental Theorem of…
In an observed generalized semi-Markov regime, estimation of transition rate of regime switching leads towards calculation of locally risk minimizing option price. Despite the uniform convergence of estimated step function of transition…
This paper introduces a new semi-parametric approach to the pricing and risk management of bespoke CDO tranches, with a particular attention to bespokes that need to be mapped onto more than one reference portfolio. The only user input in…