Related papers: Valuation of Equity Linked Securities with Guarant…

We study risk-sharing economies where heterogenous agents trade subject to quadratic transaction costs. The corresponding equilibrium asset prices and trading strategies are characterised by a system of nonlinear, fully-coupled…

In an observed generalized semi-Markov regime, estimation of transition rate of regime switching leads towards calculation of locally risk minimizing option price. Despite the uniform convergence of estimated step function of transition…

Extant literature on fair pricing methods for actuarial contexts has primarily focused on the regression setting. While such approaches are well-suited to short-term products, it is unclear how they generalize to long-term products, whose…

In this paper, we propose an alternative valuation approach for CAT bonds where a pricing formula is learned by deep neural networks. Once trained, these networks can be used to price CAT bonds as a function of inputs that reflect both the…

For the past two decades investors have observed long memory and highly correlated behavior of asset classes that does not fit into the framework of Modern Portfolio Theory. Custom correlation and standard deviation estimators consider…

We consider the pricing of derivatives written on the discretely sampled realized variance of an underlying security. In the literature, the realized variance is usually approximated by its continuous-time limit, the quadratic variation of…

We discuss the coherence properties of Expected Shortfall (ES) as a financial risk measure. This statistic arises in a natural way from the estimation of the "average of the 100p % worst losses" in a sample of returns to a portfolio. Here p…

This paper describes the dependence of market-based statistical moments of returns on statistical moments and correlations of the current and past trade values. We use Markowitz's definition of value weighted return of a portfolio as the…

We systematically investigate the links between price returns and Environment, Social and Governance (ESG) scores in the European equity market. Using interpretable machine learning, we examine whether ESG scores can explain the part of…

Variable annuities (VA) are popular insurance products. VAs provides the insured with a guaranteed accumulation rate on their premium at maturity. In addition, the insured may receive extra benefit if returns of underlying funds are high…

Sustainable financial markets play an important role in the functioning of human society. Still, the detection and prediction of risk in financial markets remain challenging and draw much attention from the scientific community. Here we…

This paper aims to extend downside protection to a hedge fund investment portfolio based on shared loss fee structures that have become increasing popular in the market. In particular, we consider a second tranche and suggest the purchase…

We develop a theoretical trading conditioning model subject to price volatility and return information in terms of market psychological behavior, based on analytical transaction volume-price probability wave distributions in which we use…

In this paper we present formulas for the valuation of debt and equity of firms in a financial network under comonotonic endowments. We demonstrate that the comonotonic setting provides a lower bound and Jensen's inequality provides an…

Range-measured return contains more information than the traditional scalar-valued return. In this paper, we propose to model the [low, high] price range as a random interval and suggest an interval-valued GARCH (Int-GARCH) model for the…

In this paper we propose a novel Bayesian methodology for Value-at-Risk computation based on parametric Product Partition Models. Value-at-Risk is a standard tool to measure and control the market risk of an asset or a portfolio, and it is…

I describe a method for estimating agents' perceived returns to investments that relies on cross-sectional data containing binary choices and prices, where prices may be imperfectly known to agents. This method identifies the scale of…

We consider the pricing of variable annuities (VAs) with general fee structures under popular stochastic volatility models such as Heston, Hull-White, Scott, $\alpha$-Hypergeometric, $3/2$, and $4/2$ models. In particular, we analyze the…

We propose a new framework to value employee stock options (ESOs) that captures multiple exercises of different quantities over time. We also model the ESO holder's job termination risk and incorporate its impact on the payoffs of both…

We study a market model in which the volatility of the stock may jump at a random time from a fixed value to another fixed value. This model was already described in the literature. We present a new approach to the problem, based on partial…