Related papers: Foreign Exchange Markets with Last Look
In a system containing a large number of interacting stochastic processes, there will typically be many non-zero correlation coefficients. This makes it difficult to either visualize the system's inter-dependencies, or identify its dominant…
We study a contextual version of the repeated brokerage problem. In each interaction, two traders with private valuations for an item seek to buy or sell based on the learner's-a broker-proposed price, which is informed by some contextual…
The aim of this paper is to determine the Value at Risk (VaR) of the portfolio consisting of long positions in foreign currencies on an emerging market. Basing on empirical data we restrict ourselves to the case when the tail parts of…
In this article, we consider the small-time asymptotics of options on a \emph{Leveraged Exchange-Traded Fund} (LETF) when the underlying Exchange Traded Fund (ETF) exhibits both local volatility and jumps of either finite or infinite…
This paper examines how shocks to currency volatilities predict exchange rates. Using option-implied volatilities, we construct a dynamic, directed network of volatility connections. Currencies that transmit more volatility shocks, which…
Currency carry trade is the investment strategy that involves selling low interest rate currencies in order to purchase higher interest rate currencies, thus profiting from the interest rate differentials. This is a well known financial…
In commodity markets the convergence of futures towards spot prices, at the expiration of the contract, is usually justified by no-arbitrage arguments. In this article, we propose an alternative approach that relies on the expected profit…
Portfolio optimisation typically aims to provide an optimal allocation that minimises risk, at a given return target, by diversifying over different investments. However, the potential scope of such risk diversification can be limited if…
We consider a stochastic game between a trader and a central bank in a target zone market with a lower currency peg. This currency peg is maintained by the central bank through the generation of permanent price impact, thereby aggregating…
We consider a novel use case for the Double Heston model (Christoffersen et al,, 2009), where the two Heston sub-variances have different spot/volatility correlations but the same volatility of volatility and mean reversion speed. This…
Following the recent literature on make take fees policies, we consider an exchange wishing to set a suitable contract with several market makers in order to improve trading quality on its platform. To do so, we use a principal-agent…
In the recent years, banks have sold structured products such as worst-of options, Everest and Himalayas, resulting in a short correlation exposure. They have hence become interested in offsetting part of this exposure, namely buying back…
This work studies the valuation of currency options in markets suffering from a financial crisis. We consider a European option where the underlying asset is a foreign currency. We assume that the value of the underlying asset is a…
We extend the QLBS model by reformulating via considering a large trader whose transactions leave a permanent impact on the evolution of the exchange rate process and therefore affect the price of contingent claims on such processes.…
Value adjustment of uncollateralized trades is determined within a risk-neutral pricing framework. When hedging such trades, investors cannot freely trade protection on their own name, thus facing an incomplete market. This fact is…
In this article, we present a discrete time modeling framework, in which the shape and dynamics of a Limit Order Book (LOB) arise endogenously from an equilibrium between multiple market participants (agents). We use the proposed modeling…
We show that the cost of market orders and the profit of infinitesimal market-making or -taking strategies can be expressed in terms of directly observable quantities, namely the spread and the lag-dependent impact function. Imposing that…
The growth of the exhange-traded fund (ETF) industry has given rise to the trading of options written on ETFs and their leveraged counterparts {(LETFs)}. We study the relationship between the ETF and LETF implied volatility surfaces when…
We consider the pricing and hedging of exotic options in a model-independent set-up using \emph{shortfall risk and quantiles}. We assume that the marginal distributions at certain times are given. This is tantamount to calibrating the model…
We investigate quantitatively the so-called leverage effect, which corresponds to a negative correlation between past returns and future volatility. For individual stocks, this correlation is moderate and decays exponentially over 50 days,…