Related papers: Pricing and hedging of decentralised lending contr…
We price European-style options written on forward contracts in a commodity market, which we model with an infinite-dimensional Heath-Jarrow-Morton (HJM) approach. For this purpose we introduce a new class of state-dependent volatility…
The Maker Protocol is a decentralized finance application that enables collateralized lending. The application uses open-bid, second-price auctions to complete its loan liquidation process. In this paper, we develop a bidding function for…
Decentralized Finance (DeFi) applications introduce novel financial instruments replicating and extending traditional ones through blockchain-based smart contracts. Among these applications, DeFi derivatives protocols enable the creation…
In decentralized finance, any individual can pool their assets into an automated market maker (AMM) -- herein we focus on the constant product market maker (CPMM) -- in exchange for a claim on a fraction of future pool assets and fees…
In the recent decades, the advance of information technology and abundant personal data facilitate the application of algorithmic personalized pricing. However, this leads to the growing concern of potential violation of privacy due to…
We apply supervised deep neural networks (DNNs) for pricing and calibration of both vanilla and exotic options under both diffusion and pure jump processes with and without stochastic volatility. We train our neural network models under…
American and Bermudan-type financial instruments are often priced with specific Monte Carlo techniques whose efficiency critically depends on the effective dimensionality of the problem and the available computational power. In our work we…
Online Peer to Peer Lending (P2PL) systems connect lenders and borrowers directly, thereby making it convenient to borrow and lend money without intermediaries such as banks. Many recommendation systems have been developed for lenders to…
We develop a model for indifference pricing in derivatives markets where price quotes have bid-ask spreads and finite quantities. The model quantifies the dependence of the prices and hedging portfolios on an investor's beliefs, risk…
This paper studies the problem of optimally allocating a cash injection into a financial system in distress. Given a one-period borrower-lender network in which all debts are due at the same time and have the same seniority, we address the…
We develop robust pricing and hedging of a weighted variance swap when market prices for a finite number of co--maturing put options are given. We assume the given prices do not admit arbitrage and deduce no-arbitrage bounds on the weighted…
The paper introduces benchmark-neutral pricing and hedging for long-term contingent claims. It employs the growth optimal portfolio of the stocks as numeraire and the new benchmark-neutral pricing measure for pricing. For a realistic…
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…
The Lightning Network, known for its millisecond settlement speeds and low transaction fees, offers a compelling alternative to traditional payment processors, which often have higher fees and longer processing times. This is particularly…
In this paper we investigate the hedging problem of a unit-linked life insurance contract via the local risk-minimization approach, when the insurer has a restricted information on the market. In particular, we consider an endowment…
A novel procedure is presented for the objective comparison and evaluation of a bank's decision rules in optimising the timing of loan recovery. This procedure is based on finding a delinquency threshold at which the financial loss of a…
Decentralized learning is an efficient emerging paradigm for boosting the computing capability of multiple bounded computing agents. In the big data era, performing inference within the distributed and federated learning (DL and FL)…
We revisit the problem of pricing and hedging plain vanilla single-currency interest rate derivatives using multiple distinct yield curves for market coherent estimation of discount factors and forward rates with different underlying rate…
Concentrated liquidity (CL) provisioning is a way how to improve the capital efficiency of Automated Market Makers (AMM). Allowing liquidity providers to use leverage is a step towards even higher capital efficiency. A number of…
Decentralized applications (dApps) consist of smart contracts that run on blockchains and clients that model collaborating parties. dApps are used to model financial and legal business functionality. Today, contracts and clients are written…