Related papers: Equivalence between forward rate interpolations an…
In this work, we develop a novel efficient quadrature and sparse grid based polynomial interpolation method to price American options with multiple underlying assets. The approach is based on first formulating the pricing of American…
This article presents a generic model for pricing financial derivatives subject to counterparty credit risk. Both unilateral and bilateral types of credit risks are considered. Our study shows that credit risk should be modeled as American…
A three-dimensional extension of the structural default model with firms' values driven by correlated diffusion processes is presented. Green's function based semi-analytical methods for solving the forward calibration problem and backward…
We apply the knockoff procedure to factor selection in finance. By building fake but realistic factors, this procedure makes it possible to control the fraction of false discovery in a given set of factors. To show its versatility, we apply…
Typically options with a path dependent payoff, such as Target Accumulation Redemption Note (TARN), are evaluated by a Monte Carlo method. This paper describes a finite difference scheme for pricing a TARN option. Key steps in the proposed…
Matrices resulting from the discretization of a kernel function, e.g., in the context of integral equations or sampling probability distributions, can frequently be approximated by interpolation. In order to improve the efficiency, a…
While machine learning has revolutionized many fields such as natural language processing (NLP) and computer vision, its impact on time-series forecasting is still widely disputed, especially in the finance domain. This paper compares…
Quantitative technology forecasting uses quantitative methods to understand and project technological changes. It is a broad field encompassing many different techniques and has been applied to a vast range of technologies. A widely used…
Experience curves are widely used to predict the cost benefits of increasing the deployment of a technology. But how good are such forecasts? Can one predict their accuracy a priori? In this paper we answer these questions by developing a…
In this paper, we establish a market model for the term structure of forward inflation rates based on the risk-neutral dynamics of nominal and real zero-coupon bonds. Under the market model, we can price inflation caplets as well as…
In this paper a general theory for interpolation methods on a rectangular grid is introduced. By the use of this theory an efficient B-spline based interpolation method for spectral codes is presented. The theory links the order of the…
A generative model based on a continuous-time normalizing flow between any pair of base and target probability densities is proposed. The velocity field of this flow is inferred from the probability current of a time-dependent density that…
The development of credit valuation adjustment (CVA) (valuation adjustments [XVA]) [Green] has increased the importance of simple interest rate models such as the Hull-White model [Tan14] [Tsuchiya]. This is because the XVA model is an FX…
In this paper we address the problem of interpolating a spline developable patch bounded by a given spline curve and the first and the last rulings of the developable surface. In order to complete the boundary of the patch a second spline…
This paper studies the dividend and capital injection problem under a diffusion risk model with general discount functions. A proportional cost is imposed when injecting capitals. For exponential discounting as time-consistent benchmark, we…
We present a comparison study between a cluster and factor graph representation of LDPC codes. In probabilistic graphical models, cluster graphs retain useful dependence between random variables during inference, which are advantageous in…
This paper outlines a methodology for constructing a geometrically smooth interpolatory curve in $\mathbb{R}^d$ applicable to oriented and flattenable points with $d\ge 2$. The construction involves four essential components: local…
The challenge to measure exposures regularly forces financial institutions into a choice between an overwhelming computational burden or oversimplification of risk. To resolve this unsettling dilemma, we systematically investigate replacing…
We reconsider the valuation of barrier options by means of binomial trees from a "forward looking" prospective rather than the more conventional "backward induction" one used by standard approaches. This reformulation allows us to write…
We present a general approach to the pricing of products in finance and insurance in the multi-period setting. It is a combination of the utility indifference pricing and optimal intertemporal risk allocation. We give a characterization of…