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There has been intensive research regarding machine learning models for predicting bankruptcy in recent years. However, the lack of interpretability limits their growth and practical implementation. This study proposes a data-driven…

For an autonomous agent, executing a poor policy may be costly or even dangerous. For such agents, it is desirable to determine confidence interval lower bounds on the performance of any given policy without executing said policy. Current…

In this paper, we consider the discounted continuous-time Markov decision process (CTMDP) with a lower bounding function. In this model, the negative part of each cost rate is bounded by the drift function, say $w$, whereas the positive…

The problem related to predicting dynamic volatility in financial market plays a crucial role in many contexts. We build a new generalized Barndorff-Nielsen and Shephard (BN-S) model suitable for uncertain environment with fuzziness and…

Thermodynamic nonequilibrium effects play a central role in momentum and energy transport in compressible flows. In conventional BGK kinetic models, the relaxation time $\tau$ is taken as a constant, which neglects the dependence of the…

According to theoretical models of valuing risky corporate securities, risk of default is primary component in overall yield spread. However, sizable empirical literature considers it otherwise by giving more importance to non-default risk…

This paper provides a framework to quantify the sensitivity associated with behavioral models based on Cumulative Prospect Theory (CPT). These are used to design dynamic pricing strategies aimed at maximizing performance metrics of the…

In April 2020, the Chicago Mercantile Exchange temporarily switched the pricing formula for West Texas Intermediate oil market options from the Black model to the Bachelier model. In this context, we introduce an additive Bachelier model…

We study a discrete-time consumption-based capital asset pricing model under expectations-based reference-dependent preferences. More precisely, we consider an endowment economy populated by a representative agent who derives utility from…

Extreme Value Theory (EVT) is one of the most commonly used approaches in finance for measuring the downside risk of investment portfolios, especially during financial crises. In this paper, we propose a novel approach based on EVT called…

In this article we model a financial derivative price as an observable on the market state function. We apply geometric techniques to integrating the Heisenberg Equation of Motion. We illustrate how the non-commutative nature of the model…

We extend the information-based asset-pricing framework by Brody, Hughston \& Macrina to incorporate a stochastic bankruptcy time for the writer of the asset. Our model introduces a non-defaultable cash flow $Z_T$ to be made at time $T$,…

In 'A Closed-Form Solution for Options with Stochastic Volatility with Applications to Bond and Currency Options', Heston proposes a Stochastic Volatility (SV) model with constant interest rate and derives a semi-explicit valuation formula.…

We study the explosion of the solutions of the SDE in the quasi-Gaussian HJM model with a CEV-type volatility. The quasi-Gaussian HJM models are a popular approach for modeling the dynamics of the yield curve. This is due to their low…

The DebtRank algorithm has been increasingly investigated as a method to estimate the impact of shocks in financial networks, as it overcomes the limitations of the traditional default-cascade approaches. Here we formulate a dynamical…

We discuss in this note applications of the Multidimensional Positive Definite Advection Transport Algorithm (MPDATA) to numerical solutions of partial differential equations arising from stochastic models in quantitative finance. In…

We consider a general one-factor short rate model, in which the instantaneous interest rate is driven by a univariate diffusion with time independent drift and volatility. We construct recursive formula for the coefficients of the Taylor…

This paper introduces BART-RDD, a sum-of-trees regression model built around a novel regression tree prior, which incorporates the special covariate structure of regression discontinuity designs. Specifically, the tree splitting process is…

There have been significant efforts devoted to solving the longevity risk given that a continuous growth in population ageing has become a severe issue for many developed countries over the past few decades. The Cairns-Blake-Dowd (CBD)…

We study the optimal stopping problem of pricing an American Put option on a Zero Coupon Bond (ZCB) in the Musiela's parametrization of the Heath-Jarrow-Morton (HJM) model for forward interest rates. First we show regularity properties of…