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Existing variance reduction techniques used in stochastic simulations for rare event analysis still require a substantial number of model evaluations to estimate small failure probabilities. In the context of complex, nonlinear finite…
We study an optimal investment/consumption problem in a model capturing market and credit risk dependencies. Stochastic factors drive both the default intensity and the volatility of the stocks in the portfolio. We use the martingale…
We propose a unified framework for equity and credit risk modeling, where the default time is a doubly stochastic random time with intensity driven by an underlying affine factor process. This approach allows for flexible interactions…
The focus of this paper is the efficient computation of counterparty credit risk exposure on portfolio level. Here, the large number of risk factors rules out traditional PDE-based techniques and allows only a relatively small number of…
Recently, a number of structured funds have emerged as public-private partnerships with the intent of promoting investment in renewable energy in emerging markets. These funds seek to attract institutional investors by tranching the asset…
A multi-dimensional extension of the structural default model with firms' values driven by diffusion processes with Marshall-Olkin-inspired correlation structure is presented. Semi-analytical methods for solving the forward calibration…
In the present work, we propose a new multifactor stochastic volatility model in which slow factor of volatility is approximated by a parabolic arc. We retain ourselves to the perturbation technique to obtain approximate expression for…
We propose a versatile Monte-Carlo method for pricing and hedging options when the market is incomplete, for an arbitrary risk criterion (chosen here to be the expected shortfall), for a large class of stochastic processes, and in the…
This paper proposes a Monte Carlo technique for pricing the forward yield to maturity, when the volatility of the zero-coupon bond is known. We make the assumption of deterministic default intensity (Hazard Rate Function). We make no…
This paper deals with the exact calibration of semidiscretized stochastic local volatility (SLV) models to their underlying semidiscretized local volatility (LV) models. Under an SLV model, it is common to approximate the fair value of…
The Heston stochastic volatility model is a widely used tool in financial mathematics for pricing European options. However, its calibration remains computationally intensive and sensitive to local minima due to the model's nonlinear…
We study an efficient strategy based on finite elements to value spread options on commodities whose underlying assets follow a dynamic described by a certain class of two-dimensional Levy models by solving their associated partial…
Duality for robust hedging with proportional transaction costs of path dependent European options is obtained in a discrete time financial market with one risky asset. Investor's portfolio consists of a dynamically traded stock and a static…
This study develops and analyzes an optimization model of smart contract adoption under bounded risk, linking structural theory with simulation and real-world validation. We examine how adoption intensity alpha is structurally pinned at a…
Valuing corporate bonds in systemic economies is challenging due to intricate webs of inter-institutional exposures. When a bank defaults, cascading losses propagate through the network, with payments determined by a system of fixed-point…
The main result of this paper is a collateralized counterparty valuation adjusted pricing equation, which allows to price a deal while taking into account credit and debit valuation adjustments (CVA, DVA) along with margining and funding…
We propose a parsimonious class of arbitrage-free, yields-only dynamic term structure models (DTSMs) with unspanned latent risks. To enable sequential estimation and forecasting, we develop a Sequential Monte Carlo framework that combines…
In this paper, we combine modern portfolio theory and option pricing theory so that a trader who takes a position in a European option contract and the underlying assets can construct an optimal portfolio such that at the moment of the…
This paper studies a robust portfolio optimization problem under the multi-factor volatility model introduced by Christoffersen et al. (2009). The optimal strategy is derived analytically under the worst-case scenario with or without…
This paper addresses a key challenge in CDO modeling: achieving a perfect fit to market prices across all tranches using a single, consistent model. The existence of such a perfect-fit model implies the absence of arbitrage among CDO…