Related papers: Berms without Calibration
The pricing and hedging of a general class of options (including American, Bermudan and European options) on multiple assets are studied in the context of currency markets where trading is subject to proportional transaction costs, and…
A set of probabilistic predictions is well calibrated if the events that are predicted to occur with probability p do in fact occur about p fraction of the time. Well calibrated predictions are particularly important when machine learning…
Species sampling processes have long served as the fundamental framework for modeling random discrete distributions and exchangeable sequences. However, data arising from distinct but related sources require a broader notion of…
We formulate a forward inflation index model with multi-factor volatility structure featuring a parametric form that allows calibration to correlations between indices of different tenors observed in the market. Assuming the nominal…
Albeit of crucial interest for both financial practitioners and researchers, market-implied volatility data of European swaptions often exhibit large portions of missing quotes due to illiquidity of the various underlying swaption…
We design a novel calibration procedure that is designed to handle the specific characteristics of options on cryptocurrency markets, namely large bid-ask spreads and the possibility of missing or incoherent prices in the considered data…
We derive measure change formulae required to price midcurve swaptions in the forward swap annuity measure with stochastic annuities' ratios. We construct the corresponding linear and exponential terminal swap rate pricing models and show…
In a model with no given probability measure, we consider asset pricing in the presence of frictions and other imperfections and characterize the property of coherent pricing, a notion related to (but much weaker than) the no arbitrage…
The goal of this work is to study binary market models with transaction costs, and to characterize their arbitrage opportunities. It has been already shown that the absence of arbitrage is related to the existence of \lambda-consistent…
Accurate predictions of basal melt rates on ice shelves are necessary for precise projections of the future behaviour of ice sheets. The computational expense associated with completely resolving the cavity circulation using an ocean model…
In this paper, we introduce a novel framework to model the exchange rate dynamics between two intrinsically linked cryptoassets, such as stablecoins pegged to the same fiat currency or a liquid staking token and its associated native token.…
Existing deep learning-based calibration scheme for rough volatility models predominantly rely on supervised learning frameworks, which incur significant computational costs due to the necessity of generating massive synthetic training…
Volatility Skew and Smile of Interest Rate products (Swaption and Caplet) are represented by SABR (Stochastic Alpha Beta Rho model). So, the Interest Rate derivatives model for pricing the callable exotic swaps should be comparable to the…
This paper focus on pricing exchange option based on copulas by MCMC algorithm. Initially, we introduce the methodologies concerned about risk-netural pricing, copulas and MCMC algorithm. After the basic knowledge, we compare the option…
Finite mixtures are a flexible modeling tool for irregularly shaped densities and samples from heterogeneous populations. When modeling with mixtures using an exchangeable prior on the component features, the component labels are arbitrary…
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…
We propose an elementary model to price European physical delivery swaptions in multicurve setting with a simple exact closed formula. The proposed model is very parsimonious: it is a three-parameter multicurve extension of the…
In this paper, we propose a new exogenous model to address the problem of negative interest rates that preserves the analytical tractability of the original Cox-Ingersoll-Ross (CIR) model with a perfect fit to the observed term-structure.…
We provide a Fundamental Theorem of Asset Pricing and a Superhedging Theorem for a model independent discrete time financial market with proportional transaction costs. We consider a probability-free version of the Robust No Arbitrage…
We argue for the use of separate exchangeability as a modeling principle in Bayesian nonparametric (BNP) inference. Separate exchangeability is de facto widely applied in the Bayesian parametric case, e.g., it naturally arises in simple…