Related papers: Affine Pricing and Hedging of Collateralized Debt …
We consider the problem of accurately measuring the credit risk of a portfolio consisting of loss exposures such as loans, bonds and other financial assets. We are particularly interested in the probability of large portfolio losses. We…
The paper examines the performance of regression models (OLS linear regression, Ridge regression, Random Forest, and Fully-connected Neural Network) on the prediction of CMA (Conservative Minus Aggressive) factor premium and the performance…
We present a stochastic programming model for informing the deployment of ad hoc flood mitigation measures to protect electrical substations prior to an imminent and uncertain hurricane. The first stage captures the deployment of a fixed…
This paper investigates the finite horizon risk-sensitive portfolio optimization in a regime-switching credit market with physical and information-induced default contagion. It is assumed that the underlying regime-switching process has…
We propose a deep hedging framework for index option portfolios, grounded in a realistic market simulator that captures the joint dynamics of S&P 500 returns and the full implied volatility surface. Our approach integrates surface-informed…
This study explores the use of Transformer-based models to predict both covariance and semi-covariance matrices for ETF portfolio optimization. Traditional portfolio optimization techniques often rely on static covariance estimates or…
We present a function-valued stochastic volatility model designed to capture the continuous-time evolution of forward curves in fixed-income or commodity markets. The dynamics of the (logarithmic) forward curves are defined by a…
We show that stochastic recovery always leads to counter-intuitive behaviors in the risk measures of a CDO tranche - namely, continuity on default and positive credit spread risk cannot be ensured simultaneously. We then propose a simple…
This paper studies a valuation framework for financial contracts subject to reference and counterparty default risks with collateralization requirement. We propose a fixed point approach to analyze the mark-to-market contract value with…
This paper presents a meta-learning framework for credit risk assessment of Italian Small and Medium Enterprises (SMEs) that explicitly addresses the temporal misalignment of credit scoring models. The approach aligns financial statement…
In this work we study the price-hedge issue for general defaultable contracts characterized by the presence of a contingent CSA of switching type. This is a contingent risk mitigation mechanism that allow the counterparties of a defaultable…
The Heston stochastic volatility model is a standard model for valuing financial derivatives, since it can be calibrated using semi-analytical formulas and captures the most basic structure of the market for financial derivatives with…
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…
This study provides a consistent and efficient pricing method for both Standard & Poor's 500 Index (SPX) options and the Chicago Board Options Exchange's Volatility Index (VIX) options under a multiscale stochastic volatility model. To…
We investigate a multi-factor extension of the asymptotic single risk factor (ASRF) model that underlies the capital charges of the "Basel II Accord". In this extended model, it is still possible to derive closed-form solutions for the risk…
The research presented in this article provides an alternative option pricing approach for a class of rough fractional stochastic volatility models. These models are increasingly popular between academics and practitioners due to their…
In this paper, we improve the performance of the large basket approximation developed by Reisinger et al. to calibrate Collateralized Debt Obligations (CDO) to iTraxx market data. The iTraxx tranches and index are computed using a basket of…
We evaluate the hedging performance of a high-order compact finite difference scheme from [4] for option pricing in Bates model. We compare the scheme's hedging performance to standard finite difference methods in different examples. We…
We investigate the problem of pricing and hedging derivatives of Electricity Futures contract when the underlying asset is not available. We propose to use a cross hedging strategy based on the Futures contract covering the larger delivery…
I explicitly work out closed form solutions for the optimal hedging strategies (in the sense of Bouchaud and Sornette) in the case of European call options, where the underlying is modeled by (unbiased) iid additive returns with Student-t…