Related papers: Pricing Quanto and Composite Contracts with Local-…

Joint calibration to SPX and VIX market data is a delicate task that requires sophisticated modeling and incurs significant computational costs. The latter is especially true when pricing of volatility derivatives hinges on nested Monte…

One of the most fundamental questions in quantitative finance is the existence of continuous-time diffusion models that fit market prices of a given set of options. Traditionally, one employs a mix of intuition, theoretical and empirical…

Robust optimization methods have shown practical advantages in a wide range of decision-making applications under uncertainty. Recently, their efficacy has been extended to multi-period settings. Current approaches model uncertainty either…

We price weather-contingent options by use of Monte Carlo simulations. After calibrating the models to fit quoted prices, we analyze bid-ask spreads in terms of correlations across markets. Results are presented for a double-trigger Weather…

In this article we look at stochastic processes with uncertain parameters, and consider different ways in which information is obtained when carrying out observations. For example we focus on the case of a the random evolution of a traded…

We price European options in a class of models in which the volatility of the underlying risky asset depends on the short rate of interest. Our study results in an explicit pricing formula that depends on knowledge of a characteristic…

We introduce a stacking version of the Monte Carlo algorithm in the context of option pricing. Introduced recently for aeronautic computations, this simple technique, in the spirit of current machine learning ideas, learns control variates…

We analyze analytic approximation formulae for pricing zero-coupon bonds in the case when the short-term interest rate is driven by a one-factor mean-reverting process with a volatility nonlinearly depending on the interest rate itself. We…

We tackle the problem of pricing Chinese convertible bonds(CCBs) using Monte Carlo simulation and dynamic programming. At each exercise time, we use the state variables of the underlying stock to regress the continuation value, and apply…

We derive asymptotic expansions for the prices of a variety of European and barrier-style claims in a general local-stochastic volatility setting. Our method combines Taylor series expansions of the diffusion coefficients with an expansion…

Accurate and well-calibrated Machine Learning (ML) models are mandatory in high-stakes settings, yet effective multiclass calibration remains challenging: global approaches assume calibration errors are homogeneous across the latent space,…

The market practice of extrapolating different term structures from different instruments lacks a rigorous justification in terms of cash flows structure and market observables. In this paper, we integrate our previous consistent theory for…

This paper deals with the exact calibration of semidiscretized stochastic local volatility (SLV) models to their underlying semidiscretized local volatility (LV) models. Under an SLV model, it is common to approximate the fair value of…

We consider the problem of pricing path-dependent options on a basket of underlying assets using simulations. As an example we develop our studies using Asian options. Asian options are derivative contracts in which the underlying variable…

This paper examines a semi-analytical approach for pricing American options in time-inhomogeneous models characterized by negative interest rates (for equity/FX) or negative convenience yields (for commodities/cryptocurrencies). Under such…

We study a two-dimensional McKean-Vlasov stochastic differential equation, whose volatility coefficient depends on the conditional distribution of the second component with respect to the first component. We prove the strong existence and…

In this work we present a general representation formula for the price of a vulnerable European option, and the related CVA in stochastic (either rough or not) volatility models for the underlying's price, when admitting correlation with…

We introduce a new class of combinatorial markets in which agents have covering constraints over resources required and are interested in delay minimization. Our market model is applicable to several settings including scheduling, cloud…

Carbon futures has recently emerged as a novel financial asset in the trading markets such as the European Union and China. Monitoring the trend of the carbon price has become critical for both national policy-making as well as industrial…

This paper provides a methodology for fast and accurate pricing of the long-dated contracts that arise as the building blocks of insurance and pension fund agreements. It applies the recursive marginal quantization (RMQ) and joint recursive…