Related papers: A High-Level Framework for Practically Model-Indep…
We explore the possibilities of importance sampling in the Monte Carlo pricing of a structured credit derivative referred to as Collateralized Debt Obligation (CDO). Modeling a CDO contract is challenging, since it depends on a pool of…
We present a fast and robust calibration method for stochastic volatility models that admit Fourier-analytic transform-based pricing via characteristic functions. The design is structure-preserving: we keep the original pricing transform…
In order to overcome the drawbacks of assuming deterministic volatility coefficients in the standard LIBOR market models to capture volatility smiles and skews in real markets, several extensions of LIBOR models to incorporate stochastic…
This paper explores advancements in quantum algorithms for derivative pricing of exotics, a computational pipeline of fundamental importance in quantitative finance. For such cases, the classical Monte Carlo integration procedure provides…
We consider a scenario where a seller possesses a dataset $D$ and trains it into models of varying accuracies for sale in the market. Due to the reproducibility of data, the dataset can be reused to train models with different accuracies,…
We prove a general duality result for multi-stage portfolio optimization problems in markets with proportional transaction costs. The financial market is described by Kabanov's model of foreign exchange markets over a finite probability…
We propose a new model for the forecasting of both the implied volatility surfaces and the underlying asset price. In the spirit of Guyon and Lekeufack (2023) who are interested in the dependence of volatility indices (e.g. the VIX) on the…
In this paper, we extend the first-order asymptotics analysis of Fouque et al. to general path-dependent financial derivatives using Dupire's functional Ito calculus. The main conclusion is that the market group parameters calibrated to…
We study prior-independent pricing for selling a single item to a single buyer when the seller observes only a single sample from the valuation distribution, while the buyer knows the distribution. Classical robust pricing approaches either…
We introduce a new Self-Organized Criticality (SOC) model for simulating price evolution in an artificial financial market, based on a multilayer network of traders. The model also implements, in a quite realistic way with respect to…
In this paper, we present a two-stage stochastic international portfolio optimisation model to find an optimal allocation for the combination of both assets and currency hedging positions. Our optimisation model allows a "currency overlay",…
The role of collateral in derivative pricing has evolved beyond credit risk mitigation, particularly following the global financial crisis, when funding costs and basis spreads became central to valuation practices. This development…
We present a Monte Carlo approach to pairs trading on mean-reverting spreads modeled by L\'evy-driven Ornstein-Uhlenbeck processes. Specifically, we focus on using a variance gamma driving process, an infinite activity pure jump process to…
We introduce signature payoffs, a family of path-dependent derivatives that are given in terms of the signature of the price path of the underlying asset. We show that these derivatives are dense in the space of continuous payoffs, a result…
Collateralization with daily margining has become a new standard in the post-crisis market. Although there appeared vast literature on a so-called multi-curve framework, a complete picture of a multi-currency setup with cross-currency basis…
The pricing of derivatives tied to baskets of assets demands a sophisticated framework that aligns with the available market information to capture the intricate non-linear dependency structure among the assets. We describe the dynamics of…
We obtain an exact necessary and sufficient condition for the existence and uniqueness of equilibrium asset prices in infinite horizon, discrete-time, arbitrage free environments. Through several applications we show how the condition…
In this article, we present a review of the recent developments on the topic of Multilevel Monte Carlo (MLMC) algorithm, in the paradigm of applications in financial engineering. We specifically focus on the recent studies conducted in two…
In the context of Risk Neutral Pricing theory, we consider the classic problem of calibrating a martingale over $\mathbb{R}^n$ to a finite number of marginals thereof, or more practically, to prices of an arbitrary finite set of (joint)…
Travel time derivatives are financial instruments that derive their value from road travel times, serving as an underlying asset that cannot be directly traded. Within the transportation domain, these derivatives are proposed as a more…