Related papers: Interpolating commodity futures prices with Krigin…
In this article, we analyze two modeling approaches for the pricing of derivative contracts on a commodity index. The first one is a microscopic approach, where the components of the index are modeled individually, and the index price is…
Predicting customer future purchases and lifetime value is a key metrics for managing marketing campaigns and optimizing marketing spend. This task is specifically challenging when the relationships between the customer and the firm are of…
We construct algorithms for computation of prices and superhedging strategies for game options in general discrete markets both from the seller and the buyer points of view.
Predicting the future evolution of complex systems is one of the main challenges in complexity science. Based on a current snapshot of a network, link prediction algorithms aim to predict its future evolution. We apply here link prediction…
Option written on several foreign exchange rates (FXRs) depends on correlation between the rates. To evaluate the option, historical estimates for correlations can be used but usually they are not stable. More significantly, pricing of the…
In this paper, we construct the utility-based optimal hedging strategy for a European-type option in the Almgren-Chriss model with temporary price impact. The main mathematical challenge of this work stems from the degeneracy of the second…
Whenever customers' choices (e.g. to buy or not a given good) depend on others choices (cases coined 'positive externalities' or 'bandwagon effect' in the economic literature), the demand may be multiply valued: for a same posted price,…
In a market with transaction costs, the price of a derivative can be expressed in terms of (preconsistent) price systems (after Kusuoka (1995)). In this paper, we consider a market with binomial model for stock price and discuss how to…
Hedging strategies in bond markets are computed by martingale representation and the Clark-Ocone formula under the choice of a suitable of numeraire, in a model driven by the dynamics of bond prices. Applications are given to the hedging of…
This paper develops a model for option market making in which the hedging activity of the market maker generates price impact on the underlying asset. The option order flow is modeled by Cox processes, with intensities depending on the…
An important revenue stream for electric battery operators is often arbitraging the hourly price spreads in the day-ahead auction. The optimal approach to this is challenging if risk is a consideration as this requires the estimation of…
We study the structure of locational marginal prices in day-ahead and real-time wholesale electricity markets. In particular, we consider the case of two North American markets and show that the price correlations contain information on the…
A risk-neutral valuation framework is developed for pricing and hedging in-play football bets based on modelling scores by independent Poisson processes with constant intensities. The Fundamental Theorems of Asset Pricing are applied to…
Spatial prediction in an arbitrary location, based on a spatial set of observations, is usually performed by Kriging, being the best linear unbiased predictor (BLUP) in a least-square sense. In order to predict a continuous surface over a…
In this paper we study the pricing of exchange options when underlying assets have stochastic volatility and stochastic correlation. An approximation using a closed-form approximation based on a Taylor expansion of the conditional price is…
We study the pricing of credit derivatives with asymmetric information. The managers have complete information on the value process of the firm and on the default threshold, while the investors on the market have only partial observations,…
Over the last few years there has been a growing interest in using financial trading networks to understand the microstructure of financial markets. Most of the methodologies developed so far for this purpose have been based on the study of…
Over-the-counter derivatives have contributed significantly to the effectiveness and efficiency of the international financial system but also entail significant counterparty credit risk. Collateralization is one of the most important and…
We study a model of congestible resources, where pricing and scheduling are intertwined. Motivated by the problem of pricing cloud instances, we model a cloud computing service as linked $GI/GI/\cdot$ queuing systems where the provider…
Over the last decade, dividends have become a standalone asset class instead of a mere side product of an equity investment. We introduce a framework based on polynomial jump-diffusions to jointly price the term structures of dividends and…