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As a motivating problem, we aim to study some special aspects of the marginal distributions of the order statistics for exchangeable and (more generally) for minimally stable non-negative random variables $T_{1},...,T_{r}$. In any case, we…
The notion of a credit spread curve is fundamental in fixed income investing, but in practice it is not `given' and needs to be constructed from bond prices either for a particular issuer, or for a sector rating-by-rating. Rather than…
Based on empirical market data, a stochastic volatility model is proposed with volatility driven by fractional noise. The model is used to obtain a risk-neutrality option pricing formula and an option pricing equation.
Based on the existing literature, this article presents the different ways of choosing the parameters of stochastic volatility models in general, in the context of pricing financial derivative contracts. This includes the use of stochastic…
In this article, we consider a 2 factors-model for pricing defaultable bond with discrete default intensity and barrier where the 2 factors are stochastic risk free short rate process and firm value process. We assume that the default event…
Market-based mechanisms such as auctions are being studied as an appropriate means for resource allocation in distributed and mulitagent decision problems. When agents value resources in combination rather than in isolation, they must often…
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…
This paper deals with a high-order accurate implicit finite-difference approach to the pricing of barrier options. In this way various types of barrier options are priced, including barrier options paying rebates, and options on…
In a stochastic volatility framework, we find a general pricing equation for the class of payoffs depending on the terminal value of a market asset and its final quadratic variation. This allows a pricing tool for European-style claims…
In multiple criteria decision aiding, very often the alternatives are compared by means of a value function compatible with the preferences expressed by the Decision Maker. The problem is that, in general, there is a plurality of compatible…
We consider the pricing and hedging of exotic options in a model-independent set-up using \emph{shortfall risk and quantiles}. We assume that the marginal distributions at certain times are given. This is tantamount to calibrating the model…
We describe a model for evolving commodity forward prices that incorporates three important dynamics which appear in many commodity markets: mean reversion in spot prices and the resulting Samuelson effect on volatility term structure,…
We develop quantum algorithms for pricing Asian and barrier options under the Heston model, a popular stochastic volatility model, and estimate their costs, in terms of T-count, T-depth and number of logical qubits, on instances under…
We consider a general local-stochastic volatility model and an investor with exponential utility. For a European-style contingent claim, whose payoff may depend on either a traded or non-traded asset, we derive an explicit approximation for…
The multinomial probit model is a popular tool for analyzing choice behaviour as it allows for correlation between choice alternatives. Because current model specifications employ a full covariance matrix of the latent utilities for the…
We study a variant of the Cont-Bouchaud model which utilizes the perco lation approach of multi-agent simulations of the stock market fluctuations. Here, instead of considering the relative price change as the difference of the total demand…
Haircutting non-cash collateral has become a key element of the post-crisis reform of the shadow banking system and OTC derivatives markets. This article develops a parametric haircut model by expanding haircut definitions beyond the…
Traders and investors involved in an option contract having the underlying stock in range bound are likely to lose their initial investment. Timing in buying an option contract is of capital importance. In a recent article [1] the…
Pricing options is an important problem in financial engineering. In many scenarios of practical interest, financial option prices associated to an underlying asset reduces to computing an expectation w.r.t.~a diffusion process. In general,…
Proportional fairness is a popular service allocation mechanism to describe and analyze the performance of data networks at flow level. Recently, several authors have shown that the invariant distribution of such networks admits a product…