Related papers: Change of Measure in Midcurve Pricing
In a stochastic volatility framework, we find a general pricing equation for the class of payoffs depending on the terminal value of a market asset and its final quadratic variation. This allows a pricing tool for European-style claims…
For the formal verification and design of control systems, abstractions with quantified accuracy are crucial. This is especially the case when considering accurate deviation bounds between a stochastic continuous-state model and its finite…
Hedging strategies in bond markets are computed by martingale representation and the Clark-Ocone formula under the choice of a suitable of numeraire, in a model driven by the dynamics of bond prices. Applications are given to the hedging of…
In this paper we present a rigorously motivated pricing equation for derivatives, including general cash collateralization schemes, which is consistent with quoted market bond prices. Traditionally, there have been differences in how…
Automated Market Makers (AMMs) are essential in Decentralized Finance (DeFi) as they match liquidity supply with demand. They function through liquidity providers (LPs) who deposit assets into liquidity pools. However, the asset trading…
A principal curve serves as a powerful tool for uncovering underlying structures of data through 1-dimensional smooth and continuous representations. On the basis of optimal transport theories, this paper introduces a novel principal curve…
This paper assesses the link between central bank's policy rate, inflation rate and output gap through Taylor rule equation in both United States and United Kingdom from 1990 to 2020. Also, it analyses the relationship between monetary…
Based on the existing literature, this article presents the different ways of choosing the parameters of stochastic volatility models in general, in the context of pricing financial derivative contracts. This includes the use of stochastic…
Quantum and classical models for delayed choice entanglement swapping by postselection of measurements are discussed.
This paper proposes a market consistent valuation framework for variable annuities with guaranteed minimum accumulation benefit, death benefit and surrender benefit features. The setup is based on a hybrid model for the financial market and…
Using simple particle models of limit order markets, we argue that mid-term over-diffusive price behaviour is inherent to the very nature of these markets. Several rules for rate changes are considered. We obtain analytical results for…
Under mild conditions, it is possible to obtain, from almost purely measure-theoretic considerations and without any specific reference to stochastic processes, a change-of-measures result, resembling the usual Radon-Nikod\'ym change of…
In this article we look at stochastic processes with uncertain parameters, and consider different ways in which information is obtained when carrying out observations. For example we focus on the case of a the random evolution of a traded…
A Markovian modulation captures the trend in the market and influences the market coefficients accordingly. The different scenarios presented by the market are modeled as the distinct states of a discrete-time Markov chain. In our paper, we…
We provide a general HJM framework for forward contracts written on abstract market indices with arbitrary fixing and payment adjustments, and featuring collateralization in any currency denominations. In view of this, we first provide a…
This paper examines the problem of pricing spread options under some models with jumps driven by Compound Poisson Processes and stochastic volatilities in the form of Cox-Ingersoll-Ross(CIR) processes. We derive the characteristic function…
An approach for quantitatively evaluating overshooting oscillations is designed to characterize the performance of shock-capturing schemes. Specifically, following our previous work focused on cases with only discontinuities, now we account…
The Hull-White one factor model is used to price interest rate options. The parameters of the model are often calibrated to simple liquid instruments, in particular European swaptions. It is therefore very important to have very efficient…
This paper proposes a Monte Carlo technique for pricing the forward yield to maturity, when the volatility of the zero-coupon bond is known. We make the assumption of deterministic default intensity (Hazard Rate Function). We make no…
This article presents, in an illustrative fashion, a first step towards an extension of the spectral theory of constant length substitutions. Our starting point is the general observation that the symbolic picture (as defined by the…