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This paper introduces a cure rate survival model by assuming that the time to the event of interest follows a beta prime distribution and that the number of competing causes of the event of interest follows a negative binomial distribution.…
One of the central tools to control the COVID-19 pandemics is the knowledge of its spreading dynamics. Here we develop a fractal model capable of describe this dynamics, in term of daily new cases, and provide quantitative criteria for some…
In this article, we consider a Markov-modulated model with jumps for short rate dynamics. We obtain closed formulas for the term structure and forward rates using the properties of the jump-telegraph process and the expectation hypothesis.…
We study the short maturity asymptotics for prices of forward start Asian options under the assumption that the underlying asset follows a local volatility model. We obtain asymptotics for the cases of out-of-the-money, in-the-money, and…
We introduce the general arbitrage-free valuation framework for counterparty risk adjustments in presence of bilateral default risk, including default of the investor. We illustrate the symmetry in the valuation and show that the adjustment…
Models to price long term loans in the securities lending business are developed. These longer horizon deals can be viewed as contracts with optionality embedded in them. This insight leads to the usage of established methods from…
We study the Hull-White model for the term structure of interest rates in the presence of volatility uncertainty. The uncertainty about the volatility is represented by a set of beliefs, which naturally leads to a sublinear expectation and…
We compare observed corporate cumulative default probabilities to those calculated using a stochastic model based on an extension of the work of Black and Cox and find that corporations default as if via diffusive dynamics. The model, based…
Recently, large-scale cascading failures in complex systems have garnered substantial attention. Such extreme events have been treated as an integral part of the self-organized criticality (SOC). Recent empirical work has suggested that…
We develop a model for the dynamic evolution of default-free and defaultable interest rates in a LIBOR framework. Utilizing the class of affine processes, this model produces positive LIBOR rates and spreads, while the dynamics are…
We propose scaling theories for Kosterlitz-Thouless (KT) phase transitions on the basis of the hallmark exponential growth of their correlation length. Finite-size scaling, finite-entanglement scaling, short-time critical dynamics, and…
The dual risk model is a popular model in finance and insurance, which is often used to model the wealth process of a venture capital or high tech company. Optimal dividends have been extensively studied in the literature for a dual risk…
Extreme events are occurrences whose magnitude and potential cause extensive damage on people, infrastructure, and the environment. Motivated by the extreme nature of the current global health landscape, which is plagued by the coronavirus…
Reinforcement learning (RL) is gaining attention by more and more researchers in quantitative finance as the agent-environment interaction framework is aligned with decision making process in many business problems. Most of the current…
To cope with the negative oil futures price caused by the COVID-19 recession, global commodity futures exchanges temporarily switched the option model from Black--Scholes to Bachelier in 2020. This study reviews the literature on…
We propose a hybrid estimation procedure to estimate global fixed parameters and subject-specific random effects in a mixed fractional Black-Scholes model based on discrete-time observations. Specifically, we consider $N$ independent…
This paper studies pricing derivatives in an age-dependent semi-Markov modulated market. We consider a financial market where the asset price dynamics follow a regime switching geometric Brownian motion model in which the coefficients…
Credit scoring plays a vital role in the field of consumer finance. Survival analysis provides an advanced solution to the credit-scoring problem by quantifying the probability of survival time. In order to deal with highly heterogeneous…
We study the risk premium impact in the Perturbative Black Scholes model. The Perturbative Black Scholes model, developed by Scotti, is a subjective volatility model based on the classical Black Scholes one, where the volatility used by the…
This paper presents a discrete-time option pricing model that is rooted in Reinforcement Learning (RL), and more specifically in the famous Q-Learning method of RL. We construct a risk-adjusted Markov Decision Process for a discrete-time…