arXiv research

CDS options allow investors to express a view on spread volatility and obtain a wider range of payoffs than are possible with vanilla CDS. We give a detailed exposition of different types of single-name CDS option, including options with upfront protection payment, recovery options and recovery swaps, and also presents…

We introduce a novel class of credit risk models in which the drift of the survival process of a firm is a linear function of the factors. The prices of defaultable bonds and credit default swaps (CDS) are linear-rational in the factors. The price of a CDS option can be uniformly approximated by polynomials in the fact…

The paper develops a method to estimate conditional survival probabilities under noisy firm value data.

We develop a pricing model for Sovereign Contingent Convertible bonds (S-CoCo) with payment standstills triggered by a sovereign's Credit Default Swap (CDS) spread. We model CDS spread regime switching, which is prevalent during crises, as a hidden Markov process, coupled with a mean-reverting stochastic process of spr…

In this work we derive an approximated no-arbitrage market valuation formula for Constant Maturity Credit Default Swaps (CMCDS). We move from the CDS options market model in Brigo (2004), and derive a formula for CMCDS that is the analogous of the formula for constant maturity swaps in the default free swap market unde…

This paper introduces an arbitrage-free conic martingale model for credit risk.

The paper analyzes risk assessment for cash flows in continuous time using the notion of convex risk measures for processes. By combining a decomposition result for optional measures, and a dual representation of a convex risk measure for bounded \cd processes, we show that this framework provides a systematic approach…

The study presents examples of $CD(0,N)$ spaces with varying dimensions and discusses the limitations of the $CD(0,N)$ condition.

The CD equalities were introduced to imply the gradient estimate of laplace operator on graphs. This article is based on the unbounded Laplacians, and finally concludes some equivalent properties of the CD(K,$\infty$)and CD(K,n).

We present a generic framework for parallel coordinate descent (CD) algorithms that includes, as special cases, the original sequential algorithms Cyclic CD and Stochastic CD, as well as the recent parallel Shotgun algorithm. We introduce two novel parallel algorithms that are also special cases---Thread-Greedy CD and …

Paper offers a simple CDS approximation formula with high accuracy.

We introduce a more restrictive version of the strict $CD(K,\infty)$ -condition, the so-called very strict $CD(K,\infty)$ -condition, and show the existence of optimal maps in very strict $CD(K,\infty)$ -spaces despite the possible lack of uniqueness of optimal plans.

Given any K and N we show that there exists a compact geodesic metric measure space satisfying locally the CD(0,4) condition but failing CD(K,N) globally. The space with this property is a suitable non convex subset of R^2 equipped with the l^\infty-norm and the Lebesgue measure. Combining many such spaces gives a (non…

New methods improve prediction regions for high-dimensional data.

This paper uses SLT to ensure learning guarantees in CD detection.

Learning algorithms for energy based Boltzmann architectures that rely on gradient descent are in general computationally prohibitive, typically due to the exponential number of terms involved in computing the partition function. In this way one has to resort to approximation schemes for the evaluation of the gradient.…

This paper is devoted to the analysis of metric measure spaces satisfying locally the curvature-dimension condition CD(K,N) introduced by the second author and also studied by Lott & Villani. We prove that the local version of CD(K,N) is equivalent to a global condition CD*(K,N), slightly weaker than the (usual, global…

Basel III introduces new capital charges for CVA. These charges, and the Basel 2.5 default capital charge can be mitigated by CDS. Therefore, to price in the capital relief that CDS contracts provide, we introduce a CDS pricing model with three legs: premium; default protection; and capital relief. If markets are compl…

Estimating the log-likelihood gradient with respect to the parameters of a Restricted Boltzmann Machine (RBM) typically requires sampling using Markov Chain Monte Carlo (MCMC) techniques. To save computation time, the Markov chains are only run for a small number of steps, which leads to a biased estimate. This bias ca…

Quantum annealer speeds up RBM training for image classification.

Regulators require financial institutions to estimate counterparty default risks from liquid CDS quotes for the valuation and risk management of OTC derivatives. However, the vast majority of counterparties do not have liquid CDS quotes and need proxy CDS rates. Existing methods cannot account for counterparty-specific…

Almost-Riemannian manifolds fail to meet a synthetic curvature condition.

Uniform bounds on ends for non-branching CD spaces with nonnegative curvature outside a compact set.

We study insolvency cascades in an interbank system when banks are allowed to insure their loans with credit default swaps (CDS) sold by other banks. We show that, by properly shifting financial exposures from one institution to another, a CDS market can be designed to rewire the network of interbank exposures in a way…

Differentially private random block coordinate descent improves utility in machine learning.

Model predicts stock returns from CDS spreads, useful for trading.

Graphs satisfy Li-Yau inequality under $CD(0,n)$ curvature condition.

Study compares CDS databases and finds discrepancies due to various factors.

We review different approaches for measuring the impact of liquidity on CDS prices. We start with reduced form models incorporating liquidity as an additional discount rate. We review Chen, Fabozzi and Sverdlove (2008) and Buhler and Trapp (2006, 2008), adopting different assumptions on how liquidity rates enter the CD…

Absence-of-Arbitrage (AoA) is the basic assumption underpinning derivatives pricing theory. As part of the OTC derivatives market, the CDS market not only provides a vehicle for participants to hedge and speculate on the default risks of corporate and sovereign entities, it also reveals important market-implied default…

CD algorithm achieves near-optimal convergence rate for unnormalized models.

We prove generalized lower Ricci bounds for Euclidean and spherical cones over complete Riemannian manifolds. These cones are regarded as complete metric measure spaces. In general, they will be neither manifolds nor Alexandrov spaces. We show that the Euclidean cone over an n-dimensional Riemannian manifold whose Ricc…

The Wiener-Hopf factorization is obtained in closed form for a phase type approximation to the CGMY Lévy process. This allows, for the approximation, exact computation of first passage times to barrier levels via Laplace transform inversion. Calibration of the CGMY model to market option prices defines the risk neutral…

The study proves sub-Riemannian manifolds cannot satisfy $\mathrm{CD}$ conditions unless they are Riemannian.

We show that if a noncollapsed $CD(K,n)$ space $X$ with $n\ge 2$ has curvature bounded above by $κ$ in the sense of Alexandrov then $K\le (n-1)κ$ and $X$ is an Alexandrov space of curvature bounded below by $K-κ(n-2)$. We also show that if a $CD(K,n)$ space $Y$ with finite $n$ has curvature bounded above then it is inf…

Contrastive divergence (CD) is a promising method of inference in high dimensional distributions with intractable normalizing constants, however, the theoretical foundations justifying its use are somewhat shaky. This document proposes a framework for understanding CD inference, how/when it works, and provides multiple…

Through a long-period analysis of the inter-temporal relations between the French markets for credit default swaps (CDS), shares and bonds between 2001 and 2008, this article shows how a financial innovation like CDS could heighten financial instability. After describing the operating principles of credit derivatives i…

Sharp log-Sobolev inequalities proved for ${\sf CD}(0,N)$ spaces.

In this paper,we will give an easy example to satisfy that we can not conclude CDE' Inequality just from the CD Inequality.

In this paper we introduce a parameter dependent class of Krylov-based methods, namely CD, for the solution of symmetric linear systems. We give evidence that in our proposal we generate sequences of conjugate directions, extending some properties of the standard Conjugate Gradient (CG) method, in order to preserve the…

New group constructed from cube complex properties.

This study examines the interaction between CDS and stock indices, revealing significant short and long-term impacts.

We show the equivalence of the definitions of very strict $CD(K,N)$ -condition defined, on one hand, using (only) the entropy functionals, and on the other, the full displacement convexity class $\mathcal{DC}_N$. In particular, we show that assuming the convexity inequalities for the critical exponent implies it for al…

In this paper we investigate Lott-Sturm-Villani's synthetic lower Ricci curvature bound on Riemannian manifolds with boundary. We prove several measure rigidity results for some important functional and geometric inequalities, which completely characterize ${\rm CD}(K, \infty)$ condition and non-collapsed ${\rm CD}(K, …

Contrastive Divergence (CD) and Persistent Contrastive Divergence (PCD) are popular methods for training the weights of Restricted Boltzmann Machines. However, both methods use an approximate method for sampling from the model distribution. As a side effect, these approximations yield significantly different biases and…

We study closed three-dimensional Alexandrov spaces with a lower Ricci curvature bound in the $\mathsf{CD}^*(K,N)$ sense, focusing our attention on those with positive or nonnegative Ricci curvature. First, we show that a closed three-dimensional $\mathsf{CD}^*(2,3)$-Alexandrov space must be homeomorphic to a spherical…

In the third part of this series we introduce consistent relative value measures for CDS-Bond basis trades using the bond-implied CDS term structure derived from fitted survival rate curves. We explain why this measure is better than the traditionally used Z-spread or Libor OAS and offer simplified hedging and trading …

Proves rectifiability for specific metric spaces with unique tangents.