Related papers: Towards Pricing Financial Derivatives with an IBM …
A new test of a wide class of interest rate models is proposed and applied to a recently developed quantum field theoretic model and the industry standard Heath-Jarrow-Morton model. This test is independent of the volatility function unlike…
This paper considers the single factor Heath-Jarrow-Morton model for the interest rate curve with stochastic volatility. Its natural formulation, described in terms of stochastic differential equations, is solved through Monte Carlo…
This paper introduces a no-arbitrage, Monte Carlo-free approach to pricing path-dependent interest rate derivatives. The Heath-Jarrow-Morton model gives arbitrage-free contingent claims prices but is infinite-dimensional, making traditional…
In this paper we show how to approximate a Heath-Jarrow-Morton dynamics for the forward prices in commodity markets with arbitrage-free models which have a finite dimensional state space. Moreover, we recover a closed form representation of…
We consider the Heath-Jarrow-Morton model of forward rates processes with linear volatility. The noise is either a Wiener or a pure jump Leevy process. We provide formulae for the forward rate processes, and discus the problem of their…
One of the peculiarities of power and gas markets is the delivery mechanism of forward contracts. The seller of a futures contract commits to deliver, say, power, over a certain period, while the classical forward is a financial agreement…
Quantum computers are not yet up to the task of providing computational advantages for practical stochastic diffusion models commonly used by financial analysts. In this paper we introduce a class of stochastic processes that are both…
The financial sector is anticipated to be one of the first industries to benefit from the increased computational power of quantum computers, in areas such as portfolio optimisation and risk management to financial derivative pricing.…
Pricing a multi-asset derivative is an important problem in financial engineering, both theoretically and practically. Although it is suitable to numerically solve partial differential equations to calculate the prices of certain types of…
We develop cointegration for multivariate continuous-time stochastic processes, both in finite and infinite dimension. Our definition and analysis are based on factor processes and operators mapping to the space of prices and cointegration.…
In energy markets, joint historical and implied calibration is of paramount importance for practitioners, yet notoriously challenging due to the need to align historical correlations of futures contracts with implied volatility smiles from…
A derivative is a financial security whose value is a function of underlying traded assets and market outcomes. Pricing a financial derivative involves setting up a market model, finding a martingale (``fair game") probability measure for…
Financial derivatives are contracts that can have a complex payoff dependent upon underlying benchmark assets. In this work, we present a quantum algorithm for the Monte Carlo pricing of financial derivatives. We show how the relevant…
We introduce two quantum algorithms to compute the Value at Risk (VaR) and Conditional Value at Risk (CVaR) of financial derivatives using quantum computers: the first by applying existing ideas from quantum risk analysis to derivative…
We propose and analyze numerical methods for the Heath-Jarrow-Morton (HJM) model. To construct the methods, we first discretize the infinite dimensional HJM equation in maturity time variable using quadrature rules for approximating the…
We introduce a quantum algorithm to compute the market risk of financial derivatives. Previous work has shown that quantum amplitude estimation can accelerate derivative pricing quadratically in the target error and we extend this to a…
We study the pricing of European-style options written on forward contracts within function-valued infinite-dimensional affine stochastic volatility models. The dynamics of the underlying forward price curves are modeled within the…
Pricing financial derivatives on quantum computers typically includes quantum arithmetic components which contribute heavily to the quantum resources required by the corresponding circuits. In this manuscript, we introduce a method based on…
The LIBOR Market Model (LMM) is a widely used model for pricing interest rate derivatives. While the Black-Scholes model is well-known for pricing stock derivatives such as stock options, a larger portion of derivatives are based on…
This paper explores advancements in quantum algorithms for derivative pricing of exotics, a computational pipeline of fundamental importance in quantitative finance. For such cases, the classical Monte Carlo integration procedure provides…