Related papers: Mathematical models and numerical methods for a ca…
Valuation adjustments are nowadays a common practice to include credit and liquidity effects in option pricing. Funding costs arising from collateral procedures, hedging strategies and taxes are added to option prices to take into account…
The Value-at-Risk (VaR) and the Expected Shortfall (ES) are the two most popular risk measures in banking and insurance regulation. To bridge between the two regulatory risk measures, the Probability Equivalent Level of VaR-ES (PELVE) was…
The Variation Evolving Method (VEM) that originates from the continuous-time dynamics stability theory seeks the optimal solutions with variation evolution principle. After establishing the first and the second evolution equations within…
This paper presents a novel hybrid approach for constricting probabilistic forecasts that combines both the Quantile Regression Averaging (QRA) method and the factor-based averaging scheme. The performance of the approach is evaluated on…
This article prices OTC derivatives with either an exogenously determined initial margin profile or endogenously approximated initial margin. In the former case, margin valuation adjustment (MVA) is defined as the liability-side discounted…
In this paper, we price European Call three different option pricing models, where the volatility is dynamically changing i.e. non constant. In stochastic volatility (SV) models for option pricing a closed form approximation technique is…
The covariance matrix adaptation evolution strategy (CMA-ES) is a powerful optimization method for continuous black-box optimization problems. Several noise-handling methods have been proposed to bring out the optimization performance of…
We propose a multiple imputation method based on principal component analysis (PCA) to deal with incomplete continuous data. To reflect the uncertainty of the parameters from one imputation to the next, we use a Bayesian treatment of the…
The aim of this article is to provide a systematic analysis of the conditions such that Fourier transform valuation formulas are valid in a general framework; i.e. when the option has an arbitrary payoff function and depends on the path of…
In this paper we discuss a general methodology to compute the market risk measure over long time horizons and at extreme percentiles, which are the typical conditions needed for estimating Economic Capital. The proposed approach extends the…
American put options are among the most frequently traded single stock options, and their calibration is computationally challenging since no closed-form expression is available. Due to the higher flexibility in comparison to European…
This paper proposes analytic forms of portfolio CoVaR and CoCVaR on the normal tempered stable market model. Since CoCVaR captures the relative risk of the portfolio with respect to a benchmark return, we apply it to the relative portfolio…
In contrast to the usual procedure of estimating the distribution of a time series and then obtaining the quantile from the distribution, we develop a compensatory model to improve the quantile estimation under a given distribution…
Exposure simulations are fundamental to many xVA calculations and are a nested expectation problem where repeated portfolio valuations create a significant computational expense. Sensitivity calculations which require shocked and unshocked…
The exhaustive group classification of a class of variable coefficient generalized KdV equations is presented, which completes and enhances results existing in the literature. Lie symmetries are used for solving an initial and boundary…
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 paper, we develop a penalized realized variance (PRV) estimator of the quadratic variation (QV) of a high-dimensional continuous It\^{o} semimartingale. We adapt the principle idea of regularization from linear regression to…
The compact Variation Evolving Method (VEM) that originates from the continuous-time dynamics stability theory seeks the optimal solutions with variation evolution principle. It is further developed to be more flexible in solving the…
Recently, three numerical methods for the computation of eigenvalues of singular matrix pencils, based on a rank-completing perturbation, a rank-projection, or an augmentation were developed. We show that all three approaches can be…
We propose a method for extending a given asset pricing formula to account for two additional sources of risk: the risk associated with future changes in market--calibrated parameters and the remaining risk associated with idiosyncratic…