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.
A new two-step LSMC method improves game option pricing accuracy.
Paper optimizes neural networks for Bermudan option pricing with faster convergence and risk management tools.
Paper applies subdiffusive dynamics to American and barrier options pricing.
In this paper, we investigate a numerical algorithm for the pricing of swing options, relying on the so-called optimal quantization method. The numerical procedure is described in details and numerous simulations are provided to assert its efficiency. In particular, we carry out a comparison with the Longstaff-Schwartz…
Enhances option pricing for American-style options using JDOI method.
Consider Least Squares Monte Carlo (LSM) algorithm, which is proposed by Longstaff and Schwartz (2001) for pricing American style securities. This algorithm is based on the projection of the value of continuation onto a certain set of basis functions via the least squares problem. We analyze the stability of the algori…
This paper solves a Bayes sequential impulse control problem for a diffusion, whose drift has an unobservable parameter with a change point. The partially-observed problem is reformulated into one with full observations, via a change of probability measure which removes the drift. The optimal impulse controls can be ex…
Utility based methods provide a very general theoretically consistent approach to pricing and hedging of securities in incomplete financial markets. Solving problems in the utility based framework typically involves dynamic programming, which in practise can be difficult to implement. This article presents a Monte Carl…
The pricing of Bermudan options amounts to solving a dynamic programming principle, in which the main difficulty, especially in high dimension, comes from the conditional expectation involved in the computation of the continuation value. These conditional expectations are classically computed by regression techniques o…
XVA is a material component of a trade valuation and hence it must impact the decision to exercise options within a given netting set. This is true for both unsecured trades and secured / cleared trades where KVA and MVA play a material role even if CVA and FVA do not. However, this effect has frequently been ignored i…
The least squares Monte Carlo (LSM) algorithm proposed by Longstaff and Schwartz (2001) is widely used for pricing Bermudan options. The LSM estimator contains undesirable look-ahead bias, and the conventional technique of avoiding it requires additional simulation paths. We present the leave-one-out LSM (LOOLSM) algor…
In this paper, we present a Longstaff-Schwartz-type algorithm for optimal stopping time problems based on the Brownian motion filtration. The algorithm is based on Leão, Ohashi and Russo and, in contrast to previous works, our methodology applies to optimal stopping problems for fully non-Markovian and non-semimartinga…
This paper explores alternative regression techniques in pricing American put options and compares to the least-squares method (LSM) in Monte Carlo implemented by Longstaff-Schwartz, 2001 which uses least squares to estimate the conditional expected payoff to the option holder from continuation. The pricing is done und…
In this paper we introduce a new algorithm for American Monte Carlo that can be used either for American-style options, callable structured products or for computing counterparty credit risk (e.g. CVA or PFE computation). Leveraging least squares regressions, the main novel feature of our algorithm is that it can be fu…
In this work, we propose a new policy iteration algorithm for pricing Bermudan options when the payoff process cannot be written as a function of a lifted Markov process. Our approach is based on a modification of the well-known Longstaff Schwartz algorithm, in which we basically replace the standard least square regre…
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…
We investigate two new strategies for the numerical solution of optimal stopping problems within the Regression Monte Carlo (RMC) framework of Longstaff and Schwartz. First, we propose the use of stochastic kriging (Gaussian process) meta-models for fitting the continuation value. Kriging offers a flexible, nonparametr…
Two signature-based methods solve optimal stopping in non-Markovian frameworks.
We propose a new approach to solve optimal stopping problems via simulation. Working within the backward dynamic programming/Snell envelope framework, we augment the methodology of Longstaff-Schwartz that focuses on approximating the stopping strategy. Namely, we introduce adaptive generation of the stochastic grids an…
Initial margin requirements are becoming an increasingly common feature of derivative markets. However, while the valuation of derivatives under collateralisation (Piterbarg 2010, Piterbarg2012), under counterparty risk with unsecured funding costs (FVA) (Burgard2011, Burgard2011, Burgard2013) and in the presence of re…
Novel method uses PDifMPs to price American options more accurately.
The pricing of American style and multiple exercise options is a very challenging problem in mathematical finance. One usually employs a Least-Square Monte Carlo approach (Longstaff-Schwartz method) for the evaluation of conditional expectations which arise in the Backward Dynamic Programming principle for such optimal…
The paper uses regression trees/random forests to price Bermudan options more efficiently.
We introduce a new method to price American-style options on underlying investments governed by stochastic volatility (SV) models. The method does not require the volatility process to be observed. Instead, it exploits the fact that the optimal decision functions in the corresponding dynamic programming problem can be …
Schwartz functions smoothly extend to real projective spaces.
We introduce a new method to price American options based on Chebyshev interpolation. In each step of a dynamic programming time-stepping we approximate the value function with Chebyshev polynomials. The key advantage of this approach is that it allows to shift the model-dependent computations into an offline phase pri…
The paper develops a method for stochastic differential equations on manifolds using Schwartz morphisms and diffusion generators.
Enhances valuation of variable annuities with stochastic interest rate models.
An uncollateralized swap hedged back-to-back by a CCP swap is used to introduce FVA. The open IR01 of FVA, however, is a sure sign of risk not being fully hedged, a theoretical no-arbitrage pricing concern, and a bait to lure market risk capital, a practical business concern. By dynamically trading the CCP swap, with t…
Two sweeps of the Brennan-Schwartz algorithm solve American options under negative rates.
Optimizes liquidity withdrawal timing for AMM LPs to balance fees and impermanent loss.
The Schwartz-Smith model parameters are estimated using Kalman Filter with additional constraints.
The paper proves estimates for Hodge Laplacians on Lie groups.
The paper constructs Ricci-flat Kähler manifolds with specific decay properties.
The Libor market model is a mainstay term structure model of interest rates for derivatives pricing, especially for Bermudan swaptions, and other exotic Libor callable derivatives. For numerical implementation the pricing of derivatives with Libor market models is mainly carried out with Monte Carlo simulation. The PDE…
Survey recent constructions of cyclic cocycles for Lie groups.
The paper explores global index formulas for one-dimensional holomorphic foliations.
Resolving Schwartz's quadratic meander number conjecture
Describes representations of modular group into SL(3,R)/SO(3).
We define the spaces of Schwartz functions, tempered functions and tempered distributions on manifolds definable in polynomially bounded o-minimal structures. We show that all the classical properties that these spaces have in the Nash category, as first studied in Fokko du Cloux's work, also hold in this generalized s…
In the paper "Pappus's theorem and the modular group", R. Schwartz constructed a 2-dimensional family of faithful representations of the modular group into the group of projective symmetries of the projective plane via Pappus Theorem. The image of the unique index 2 subg…
We prove a conjecture of R. Schwartz about the type of some complex hyperbolic triangle groups.
Study asymptotics of extension and orthogonal Bergman kernels for high tensor powers of positive line bundles.
PDSim simulates and estimates commodity futures prices using polynomial diffusion models.
We discuss `hd-compactifications' of $\SL(2,\bbK)$ for $\bbK=\bbC$ or $\bbR.$ These are compact manifolds with boundary on which both the Schwartz and the Harish-Chandra Schwartz spaces are shown to be relatively standard spaces of conormal functions relative to the boundary. Closure under convolution and other module …
A beta function for double layers is defined and analyzed.
We construct an algebra of smooth functions over the tangent groupoid associated to any Lie groupoid. This algebra is a field of algebras over the closed interval [0, 1] which fiber at zero is the algebra of Schwartz functions over the Lie algebroid, whereas any fiber out of zero is the convolution algebra of the initi…
We deduce a recent theorem by R. Schwartz on the structure of the so-called Poncelet grid from complete integrability of the billiard in an ellipse