Related papers: Change of Measure in Midcurve Pricing
We study specific nonlinear transformations of the Black-Scholes implied volatility to show remarkable properties of the volatility surface. Model-free bounds on the implied volatility skew are given. Pricing formulas for the European…
Silkswap is an automated market maker model designed for efficient stablecoin trading with minimal price impact. The original purpose of Silkswap is to facilitate the trading of fiat-pegged stablecoins with the stablecoin Silk, but it can…
The paper presents a construction of a quantitative measure of variability for parameter estimates in the data fitting problem under interval uncertainty. It shows the degree of variability and ambiguity of the estimate, and the need for…
To compare different forecasting methods on demand series we require an error measure. Many error measures have been proposed, but when demand is intermittent some become inapplicable, some give counter-intuitive results, and there is no…
This paper assesses the hedge effectiveness of an index-based longevity swap and a longevity cap. Although swaps are a natural instrument for hedging longevity risk, derivatives with non-linear pay-offs, such as longevity caps, also provide…
In commodity and energy markets swing options allow the buyer to hedge against futures price fluctuations and to select its preferred delivery strategy within daily or periodic constraints, possibly fixed by observing quoted futures…
We study the problem of pricing variable annuities with a multi-layer expense strategy, under which the insurer charges fees from the policyholder's account only when the account value lies in some pre-specified disjoint intervals, where on…
The metric-adjusted skew information establishes a connection between the geometrical formulation of quantum statistics and the measures of quantum information. We study uncertainty relations in product and summation forms of…
We present a function-valued stochastic volatility model designed to capture the continuous-time evolution of forward curves in fixed-income or commodity markets. The dynamics of the (logarithmic) forward curves are defined by a…
In this paper, we are concerned with the valuation of Guaranteed Annuity Options (GAOs) under the most generalised modelling framework where both interest and mortality rates are stochastic and correlated. Pricing these type of options in…
For a converging sequence of exponential L\'evy models, we give conditions under which the associated sequence of option prices converges. We also study the behaviour of the prices when no such convergence holds. We then consider two…
We present a multivariate stochastic volatility model with leverage, which is flexible enough to recapture the individual dynamics as well as the interdependencies between several assets while still being highly analytically tractable.…
Rate change calculations in the literature involve deterministic methods that measure the change in premium for a given policy. The definition of rate change as a statistical parameter is proposed to address the stochastic nature of the…
In mathematical finance, a process of calibrating stochastic volatility (SV) option pricing models to real market data involves a numerical calculation of integrals that depend on several model parameters. This optimization task consists of…
We present a new model for credit index derivatives, in the top-down approach. This model has a dynamic loss intensity process with volatility and jumps and can include counterparty risk. It handles CDS, CDO tranches, Nth-to-default and…
In this work we derive an approximated no-arbitrage market valuation formula for Constant Maturity Credit Default Swaps (CMCDS). We move from the CDS options market model in Brigo (2004), and derive a formula for CMCDS that is the analogous…
The traditional way of building a yield curve is to choose an interpolation on discount factors, implied by the market tradable instruments. Since then, constructions based on specific interpolations of the forward rates have become the…
We propose a multi-scale stochastic volatility model in which a fast mean-reverting factor of volatility is built on top of the Heston stochastic volatility model. A singular pertubative expansion is then used to obtain an approximation for…
We develop an arbitrage-free random field LIBOR market model to price cross-currency derivatives. The uncertainty of the forward LIBOR rates of our cross-currency model is driven by a two time parameter random field instead of a finite…
In this study, we propose a new formula for spread option pricing with the dependence of two assets described by a copula function. The advantage of the proposed method is that it requires only the numerical evaluation of a one-dimensional…