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Cash collateral is perfect in that it provides simultaneous counterparty credit risk protection and derivatives funding. Securities are imperfect collateral, because of collateral segregation or differences in CSA haircuts and repo…
The pricing and hedging of a general class of options (including American, Bermudan and European options) on multiple assets are studied in the context of currency markets where trading is subject to proportional transaction costs, and…
The paper considers variable selection in linear regression models where the number of covariates is possibly much larger than the number of observations. High dimensionality of the data brings in many complications, such as (possibly…
Following the recent literature on make take fees policies, we consider an exchange wishing to set a suitable contract with several market makers in order to improve trading quality on its platform. To do so, we use a principal-agent…
We consider a model of bilateral trade with private values. The value of the buyer and the cost of the seller are jointly distributed. The true joint distribution is unknown to the designer, however, the marginal distributions of the value…
We present an adaptive approach for valuing the European call option on assets with stochastic volatility. The essential feature of the method is a reduction of uncertainty in latent volatility due to a Bayesian learning procedure. Starting…
In this work, we investigate a biased dollar exchange model with collective debt limit, in which agents picked at random (with a rate depending on the amount of dollars they have) give at random time a dollar to another agent being picked…
This paper provides intuition on the relationship of accrual and mark-to-market valuation for cash and forward interest rate trades. Discounted cashflow valuation is compared to spread-based valuation for forward trades, which explains the…
We present analytical investigations of a multiplicative stochastic process that models a simple investor dynamics in a random environment. The dynamics of the investor's budget, $x(t)$, depends on the stochasticity of the return on…
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…
We provide a lean, non-technical exposition on the pricing of path-dependent and European-style derivatives in the Cox-Ross-Rubinstein (CRR) pricing model. The main tool used in the paper for cleaning up the reasoning is applying static…
We investigate the pricing of financial options under the 2-hypergeometric stochastic volatility model. This is an analytically tractable model that reproduces the volatility smile and skew effects observed in empirical market data. Using a…
Thanks to their ability to capture complex dependence structures, copulas are frequently used to glue random variables into a joint model with arbitrary marginal distributions. More recently, they have been applied to solve statistical…
We propose factor models for the cross-section of daily cryptoasset returns and provide source code for data downloads, computing risk factors and backtesting them out-of-sample. In "cryptoassets" we include all cryptocurrencies and a host…
Using simple particle models of limit order markets, we argue that mid-term over-diffusive price behaviour is inherent to the very nature of these markets. Several rules for rate changes are considered. We obtain analytical results for…
This work examines the expected computational cost to determine an approximate global minimum of a class of cost functions characterized by the variance of coefficients. The cost function takes $N$-dimensional binary states as arguments and…
We discuss the pricing methodology for Bonus Certificates and Barrier Reverse-Convertible Structured Products. Pricing for a European barrier condition is straightforward for products of both types and depends on an efficient interpolation…
This article proposes a generalized notion of extreme multivariate dependence between two random vectors which relies on the extremality of the cross-covariance matrix between these two vectors. Using a partial ordering on the…
Given a stochastic structure with a filtration $\mathbb{F}$, the class of all random times whose conditional distribution functions are differentiable with respect to some $\mathbb{F}$ adapted non decreasing processes is considered. The…
Many large-scale machine learning problems involve estimating an unknown parameter $\theta_{i}$ for each of many items. For example, a key problem in sponsored search is to estimate the click through rate (CTR) of each of billions of…