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 applies subdiffusive dynamics to American and barrier options pricing.
Paper optimizes neural networks for Bermudan option pricing with faster convergence and risk management tools.
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…
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…
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…
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…
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…
Optimizes liquidity withdrawal timing for AMM LPs to balance fees and impermanent loss.
This paper deals with the computation of second or higher order greeks of financial securities. It combines two methods, Vibrato and automatic differentiation and compares with other methods. We show that this combined technique is faster than standard finite difference, more stable than automatic differentiation of se…