Related papers: Pricing Quanto and Composite Contracts with Local-…
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 work introduces an end-to-end framework for multi-asset option pricing that combines market-consistent risk-neutral density recovery with quantum-accelerated numerical integration. We first calibrate arbitrage-free marginal…
Multifidelity Monte Carlo methods often rely on a preprocessing phase consisting of standard Monte Carlo sampling to estimate correlation coefficients between models of different fidelity to determine the weights and number of samples for…
We consider option pricing using a discrete-time Markov switching stochastic volatility with co-jump model, which can model volatility clustering and varying mean-reversion speeds of volatility. For pricing European options, we develop a…
This whitepaper introduces an innovative mechanism for pricing perpetual contracts and quoting fees to traders based on current market conditions. The approach employs liquidity curves and on-chain oracles to establish a new adaptive…
We propose a top-down model for cash CLO. This model can consistently price cash CLO tranches both within the same deal and across different deals. Meaningful risk measures for cash CLO tranches can also be defined and computed. This method…
We propose a multi-scale stochastic volatility model in which a fast mean-reverting factor of volatility is built on top of the Heston stochastic volatility model. A singular pertubative expansion is then used to obtain an approximation for…
We propose a new model for pricing Quanto CDS and risky bonds. The model operates with four stochastic factors, namely: hazard rate, foreign exchange rate, domestic interest rate, and foreign interest rate, and also allows for…
We obtain new closed-form pricing formulas for contingent claims when the asset follows a Dupire-type local volatility model. To obtain the formulas we use the Dyson-Taylor commutator method that we have recently developed in [5, 6, 8] for…
In recent decades, new methods and approaches have been developed for forecasting intermittent demand series. However, the majority of research has focused on point forecasting, with little exploration into probabilistic intermittent demand…
The importance of collateralization through the change of funding cost is now well recognized among practitioners. In this article, we have extended the previous studies of collateralized derivative pricing to more generic situation, that…
Agent-based models, particularly those applied to financial markets, demonstrate the ability to produce realistic, simulated system dynamics, comparable to those observed in empirical investigations. Despite this, they remain fairly…
In this survey paper we discuss recent advances on short interest rate models which can be formulated in terms of a stochastic differential equation for the instantaneous interest rate (also called short rate) or a system of such equations…
In this paper we develop numerical pricing methodologies for European style Exchange Options written on a pair of correlated assets, in a market with finite liquidity. In contrast to the standard multi-asset Black-Scholes framework, trading…
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…
A simple method is proposed to estimate the instantaneous correlations between state variables in a hybrid system from the empirical correlations between observable market quantities such as spot rate, stock price and implied volatility.…
We consider the joint SPX-VIX calibration within a general class of Gaussian polynomial volatility models in which the volatility of the SPX is assumed to be a polynomial function of a Gaussian Volterra process defined as a stochastic…
This study presents a comparative analysis of Monte Carlo (MC) and quasi-Monte Carlo (QMC) methods in the context of derivative pricing, emphasizing convergence rates and the curse of dimensionality. After a concise overview of traditional…
When calibrating spatial partial equilibrium models with conjectural variations, some modelers fit the suppliers' sales to the available data in addition to total consumption and price levels. While this certainly enhances the quality of…
We propose a generic calibration framework to both vanilla and no-touch options for a large class of continuous semi-martingale models. The method builds upon the forward partial integro-differential equation (PIDE) derived in Hambly et al.…