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The study seeks to develop an effective strategy based on the novel framework of statistical arbitrage based on graph clustering algorithms. Amalgamation of quantitative and machine learning methods, including the Kelly criterion, and an…
This paper gives an arbitrage-free prediction for future prices of an arbitrary co-terminal set of options with a given maturity, based on the observed time series of these option prices. The statistical analysis of such a multi-dimensional…
We describe a way to complete a correlation matrix that is not fully specified. Such matrices often arise in financial applications when the number of stochastic variables becomes large or when several smaller models are combined in a…
We develop a general term structure framework taking stochastic discontinuities explicitly into account. Stochastic discontinuities are a key feature in interest rate markets, as for example the jumps of the term structures in…
This paper focuses on a dynamic multi-asset mean-variance portfolio selection problem under model uncertainty. We develop a continuous time framework for taking into account ambiguity aversion about both expected return rates and…
In this work, we introduce a Monte Carlo method for the dynamic hedging of general European-type contingent claims in a multidimensional Brownian arbitrage-free market. Based on bounded variation martingale approximations for…
In a model with no given probability measure, we consider asset pricing in the presence of frictions and other imperfections and characterize the property of coherent pricing, a notion related to (but much weaker than) the no arbitrage…
Over-the-counter derivatives have contributed significantly to the effectiveness and efficiency of the international financial system but also entail significant counterparty credit risk. Collateralization is one of the most important and…
We consider the computation of model-free bounds for multi-asset options in a setting that combines dependence uncertainty with additional information on the dependence structure. More specifically, we consider the setting where the…
In this paper we develop a framework for discretely compounding interest rates which is based on the forward price process approach. This approach has a number of advantages, in particular in the current market environment. Compared to the…
Explicit robust hedging strategies for convex or concave payoffs under a continuous semimartingale model with uncertainty and small transaction costs are constructed. In an asymptotic sense, the upper and lower bounds of the cumulative…
We consider as given a discrete time financial market with a risky asset and options written on that asset and determine both the sub- and super-hedging prices of an American option in the model independent framework of ArXiv:1305.6008. We…
We develop a multi-curve term structure setup in which the modelling ingredients are expressed by rational functionals of Markov processes. We calibrate to LIBOR swaptions data and show that a rational two-factor lognormal multi-curve model…
A large set of daily FOREX time series is analyzed. The corresponding correlation matrices (CM) are constructed for USD, EUR and PLZ used as the base currencies. The triangle rule is interpreted as constraints reducing the number of…
Pricing assets has attracted significant attention from the financial technology community. We observe that the existing solutions overlook the cross-sectional effects and not fully leveraged the heterogeneous data sets, leading to…
This paper studies the equal risk pricing (ERP) framework for the valuation of European financial derivatives. This option pricing approach is consistent with global trading strategies by setting the premium as the value such that the…
We introduce an innovative theoretical framework to model derivative transactions between defaultable entities based on the principle of arbitrage freedom. Our framework extends the traditional formulations based on Credit and Debit…
We consider model-free pricing of digital options, which pay out if the underlying asset has crossed both upper and lower barriers. We make only weak assumptions about the underlying process (typically continuity), but assume that the…
In a universe with a single currency, there would be no foreign exchange market, no foreign exchange rates, and no foreign exchange. Over the past twenty-five years, the way the market has performed those tasks has changed enormously. The…
We present a quantitative study of the markets and models evolution across the credit crunch crisis. In particular, we focus on the fixed income market and we analyze the most relevant empirical evidences regarding the divergences between…