Related papers: Measuring and hedging financial risks in dynamical…
In this review article we explore several recent advances in the quantitative modeling of financial markets. We begin with the Efficient Markets Hypothesis and describe how this controversial idea has stimulated a number of new directions…
We study the risk assessment of uncertain cash flows in terms of dynamic convex risk measures for processes as introduced in Cheridito, Delbaen, and Kupper (2006). These risk measures take into account not only the amounts but also the…
In the theory of riskfree hedges in continuous time finance, one can start with the delta-hedge and derive the option pricing equation, or one can start with the replicating, self-financing hedging strategy and derive both the delta-hedge…
We pick up the regime switching model for asset returns introduced by Rogers and Zhang. The calibration involves various markets including implied volatility in order to gain additional predictive power. We focus on the calculation of risk…
In incomplete financial markets not every contingent claim can be replicated by a self-financing strategy. The risk of the resulting shortfall can be measured by convex risk measures, recently introduced by F\"ollmer, Schied (2002). The…
Risks threatening modern societies form an intricately interconnected network that often underlies crisis situations. Yet, little is known about how risk materializations in distinct domains influence each other. Here we present an approach…
We propose a pricing technique based on coherent risk measures, which enables one to get finer price intervals than in the No Good Deals pricing. The main idea consists in splitting a liability into several parts and selling these parts to…
Financial global crisis has devastating impacts to economies since early XX century and continues to impose increasing collateral damages for governments, enterprises, and society in general. Up to now, all efforts to obtain efficient…
Systemic risk measures were introduced to capture the global risk and the corresponding contagion effects that is generated by an interconnected system of financial institutions. To this purpose, two approaches were suggested. In the first…
One of the shortcomings of the Black and Scholes model on option pricing is the assumption that trading of the underlying asset does not affect the price of that asset. This assumption can be fulfilled only in perfectly liquid markets.…
We study robust notions of good-deal hedging and valuation under combined uncertainty about the drifts and volatilities of asset prices. Good-deal bounds are determined by a subset of risk-neutral pricing measures such that not only…
The field of Financial Networks is a paramount example of the novel applications of Statistical Physics that have made possible by the present data revolution. As the total value of the global financial market has vastly outgrown the value…
This paper studies the model risk of the Black-Scholes (BS) model in pricing and risk-managing variable annuities motivated by its wide usage in the insurance industry. Specifically, we derive a model-free decomposition of the no-arbitrage…
This article introduces the groundbreaking concept of the financial differential machine learning algorithm through a rigorous mathematical framework. Diverging from existing literature on financial machine learning, the work highlights the…
Risk management is a fundamental discipline in project management, which includes, among others, quantitative risk analysis. Throughout several years of teaching, we have observed difficulties in students performing Monte Carlo Simulation…
Freight rate derivatives constitute a very popular financial tool in shipping industry, that allows to the market participants and the individuals operating in the field, to reassure their financial positions against the risk occurred by…
We give a new predictive mathematical model for macroeconomics, which deals specifically with asset prices and earnings fluctuations, in the presence of a dynamic economy involving mergers, acquisitions, and hostile takeovers. Consider a…
Trading large volumes of a financial asset in order driven markets requires the use of algorithmic execution dividing the volume in many transactions in order to minimize costs due to market impact. A proper design of an optimal execution…
A new standpoint on financial time series, without the use of any mathematical model and of probabilistic tools, yields not only a rigorous approach of trends and volatility, but also efficient calculations which were already successfully…
This paper presents the contemporary Fundamental Theorem of Asset Pricing as being equivalent to approaches to pricing that emerged before 1700 in the context of Virtue Ethics. This is done by considering the history of science and…