A locally-built, LLM-digested index of recent arXiv papers in quant finance, geometry/topology, and statistical ML — keyword search served straight from SQLite on this machine.
New method reduces errors in pricing and sensitivities for discontinuous payoffs.
We provide representations of solutions to terminal value problems of inhomogeneous Black-Scholes equations and studied such general properties as min-max estimates, gradient estimates, monotonicity and convexity of the solutions with respect to the stock price variable, which are important for financial security prici…
Adaptive Multilevel Splitting improves rare event pricing for financial derivatives.
The Monte Carlo pathwise sensitivities approach is well established for smooth payoff functions. In this work, we present a new Monte Carlo algorithm that is able to calculate the pathwise sensitivities for discontinuous payoff functions. Our main tool is to combine the one-step survival idea of Glasserman and Staum wi…
The paper analyzes Variable Annuities with surrender charges, providing a pricing formula and optimal exercise boundary.
This article combines various methods of analysis to draw a comprehensive picture of penalty approximations to the value, hedge ratio, and optimal exercise strategy of American options. While convergence of the penalised solution for sufficiently smooth obstacles is well established in the literature, sharp rates of co…
We consider the impact of ambiguity on the optimal timing of a class of two-dimensional integral option contracts when the exercise payoff is a positively homogeneous measurable function. Hence, the considered class of exercise payoffs includes discontinuous functions as well. We identify a parameterized family of exce…
Paper uses deep learning to price and hedge options in incomplete markets.
We consider the problem of exponential utility indifference valuation under the simplified framework where traded and nontraded assets are uncorrelated but where the claim to be priced possibly depends on both. Traded asset prices follow a multivariate Black and Scholes model, while nontraded asset prices evolve as gen…
We extend the viscosity solution characterization proved in [5] for call/put American option prices to the case of a general payoff function in a multi-dimensional setting: the price satisfies a semilinear re-action/diffusion type equation. Based on this, we propose two new numerical schemes inspired by the branching p…
In this paper the problem of optimal derivative design, profit maximization and risk minimization under adverse selection when multiple agencies compete for the business of a continuum of heterogenous agents is studied. The presence of ties in the agents' best-response correspondences yields discontinuous payoff functi…
Quasi-Monte Carlo speeds up option Greeks calculation on GPUs.
New financial model with sandwiched volatility for option pricing.
Method simulates drawdown and duration in Lévy models using Gaussian approximation.
Optimization in the presence of sharp (non-Lipschitz), unpredictable (w.r.t. time and amount) changes is a challenging and largely unexplored problem of great significance. We consider the class of piecewise Lipschitz functions, which is the most general online setting considered in the literature for the problem, and …
In this work, we introduce a Monte Carlo method for the dynamic hedging of general European-type contingent claims in a multidimensional Brownian arbitrage-free market. Based on bounded variation martingale approximations for Galtchouk-Kunita-Watanabe decompositions, we propose a feasible and constructive methodology w…
This paper extends Heston model to fractional Brownian motion for option pricing.
Deep learning solves barrier options with stochastic volatility.
Method constructs CFMMs matching desired payoffs.
Proves nonemptyness of domains for specific group actions.
Optimal payoff choice constrained by Bregman-Wasserstein divergence.
Optimal portfolio yields a digital option payoff.
Study finds cheapest possible payoff under ambiguity, linking to maxmin expected utility.
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 that is exploited to quickly price arbitrary continuous payoffs. This approach …
The paper uncovers the impact of price and payoff autocorrelations in multi-period asset pricing models.
We consider the deformation of a discontinuous group acting on the Euclidean space by affine transformations. A distinguished feature here is that even a `small' deformation of a discrete subgroup may destroy proper discontinuity of its action. In order to understand the local structure of the deformation space of disc…
In this paper, we consider the numerical pricing of financial derivatives using Radial Basis Function generated Finite Differences in space. Such discretization methods have the advantage of not requiring Cartesian grids. Instead, the nodes can be placed with higher density in areas where there is a need for higher acc…
New method uses neural networks for better financial hedging.
Cut-DeepONet handles discontinuities and sharp transitions in neural operators.
Paper shows how to replicate payoffs without oracles in CFMMs.
Study proves existence of equilibrium in incomplete economies with discontinuous volatility.
New domains of discontinuity found for Anosov representations.
As early as 1972, Penrose - in a purely formal way - introduced a "discontinuous coordinate transformation", which relates a continuous representation of the metric of impulsive pp-waves to a discontinuous one. On the basis of the invertibility concept for generalized functions developed recently by the first author, w…
We study a non-parametric multi-armed bandit problem with stochastic covariates, where a key complexity driver is the smoothness of payoff functions with respect to covariates. Previous studies have focused on deriving minimax-optimal algorithms in cases where it is a priori known how smooth the payoff functions are. I…
Study the discontinuity of functions not embeddable in Euclidean space.
Modelling stock prices via jump processes is common in financial markets. In practice, to hedge a contingent claim one typically uses the so-called delta-hedging strategy. This strategy stems from the Black--Merton--Scholes model where it perfectly replicates contingent claims. From the theoretical viewpoint, there is …
Study new symmetries in non-symmetric spaces and discontinuous groups.
Paper finds surface groups can deform in reductive symmetric spaces.
A new method for unsupervised disentanglement using axis-aligned cliffs.
Develops a new method for robust risk measurement by averaging nearby payoffs.
New method estimates active subspaces for jump-discontinuous functions.
This article gives an up-to-date account of the theory of discrete group actions on non-Riemannian homogeneous spaces. As an introduction of the motifs of this article, we begin by reviewing the current knowledge of possible global forms of pseudo-Riemannian manifolds with constant curvatures, and discuss what kind of …
Agent optimizes perpetual contract liquidation with transaction costs and risk.
Multi-armed bandit problems are the most basic examples of sequential decision problems with an exploration-exploitation trade-off. This is the balance between staying with the option that gave highest payoffs in the past and exploring new options that might give higher payoffs in the future. Although the study of band…
The first known example of a complete Riemannian manifold whose isoperimetric profile is discontinuous is given.
Paper analyzes error in stochastic approximation for discontinuous functions.
Bayesian emulator tackles models with discontinuities efficiently.
We characterise completely when limit sets, as parametrised by Cannon-Thurston maps, move discontinuously for a sequence of algebraically convergent quasi-Fuchsian groups.