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The cryptocurrency market is volatile, non-stationary and non-continuous. Together with liquid derivatives markets, this poses a unique opportunity to study risk management, especially the hedging of options, in a turbulent market. We study…
In this paper, we provide a unified treatment of the Vanna-Volga pricing technique. We derive the value of single and double barriers FX options, as well as closed formulas for the Delta, Vega, Vanna and Volga of those contracts.
Financial markets have evolved over centuries, and exchanges have converged to rely on the order book mechanism for market making. Latency on the blockchain, however, has prevented decentralized exchanges (DEXes) from utilizing the order…
This paper considers liquidity as an explanation for the positive association between expected idiosyncratic volatility (IV) and expected stock returns. Liquidity costs may affect the stock returns, through bid-ask bounce and other…
We provide a thorough analysis of the path-dependent volatility model introduced by Guyon \cite{G17}, proving existence and uniqueness of a strong solution, characterising its behaviour at boundary points, providing asymptotic closed-form…
We study the liquidity commonality impact of local and foreign institutional investment in the Australian equity market in the cross-section and over time. We find that commonality in liquidity is higher for large stocks compared to small…
In this study, we evaluate the effects of natural disasters on the stock (market) values of firms located in the affected counties. We are able to measure the change in stock prices of the firms affected by the 2021 Texas winter storm. To…
We investigate the problem of pricing derivatives under a fractional stochastic volatility model. We obtain an approximate expression of the derivative price where the stochastic volatility can be composed of deterministic functions of time…
In a pathbreaking paper, Cover and Ordentlich (1998) solved a max-min portfolio game between a trader (who picks an entire trading algorithm, $\theta(\cdot)$) and "nature," who picks the matrix $X$ of gross-returns of all stocks in all…
Over 90% of exchange trading on crypto options has always been on the Deribit platform. This centralised crypto exchange only lists inverse products because they do not accept fiat currency. Currently, fiat-based traders can only make…
We propose a risk neutral approach to forecast the cashflows of music catalogs, based on historical revenue data. We use a discounted cashflows formula to produce reasonable ranges of multipliers for these assets, based on the age of the…
Prediction markets are a popular, prominent, and successful structure for a collective intelligence platform. However the exact mechanism by which information known to the participating traders is incorporated into the market price is…
We consider option pricing using replicating binomial trees, with a two fold purpose. The first is to introduce ESG valuation into option pricing. We explore this in a number of scenarios, including enhancement of yield due to trader…
Geometry constitutes a core set of intuitions present in all humans, regardless of their language or schooling [1]. Could brain's built in machinery for processing geometric information take part in uncertainty representation? For decades…
The limitations of the classical Black-Scholes model are examined by comparing calculated and actual historical prices of European call options on stocks from several sectors of the S&P 500. Persistent differences between the two prices…
We consider the problem of fair pricing and hedging under small perturbations of the num\'eraire. We show that for replicable claims, the change of num\'eraire affects neither the fair price nor the hedging strategy. For non-replicable…
The main goal of this paper is to use the enlargement of ltration framework for pricing zerocoupon CAT bonds. For this purpose, we develop two models where the trigger event time is perfectly covered by an increasing sequence of stopping…
We present a stochastic local volatility model for derivative contracts on commodity futures. The aim of the model is to be able to recover the prices of derivative claims both on futures contracts and on indices on futures strategies.…
We consider the valuation of contingent claims with delayed dynamics in a Black&Scholes complete market model. We find a pricing formula that can be decomposed into terms reflecting the market values of the past and the present, showing how…
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…