arXiv research

Paper shows how to replicate payoffs without oracles in CFMMs.

The paper analyzes Variable Annuities with surrender charges, providing a pricing formula and optimal exercise boundary.

New algorithms reduce regret in non-stationary bandits with increasing payoffs.

This paper studies the valuation of European contingent claims with short selling bans under the equal risk pricing (ERP) framework proposed in Guo and Zhu (2017) where analytical pricing formulae were derived in the case of monotonic payoffs under risk-neutral measures. We establish a unified framework for this new pr…

In this paper, we investigate the generalization of the Call-Put duality equality obtained in [1] for perpetual American options when the Call-Put payoff $(y-x)^+$ is replaced by $φ(x,y)$. It turns out that the duality still holds under monotonicity and concavity assumptions on $φ$. The specific analytical form of the …

SISR improves feature attribution in complex payoff schemes.

We analyze the relation between earning forecast accuracy and expected profitability of financial analysts. Modeling forecast errors with a multivariate Gaussian distribution, a complete characterization of the payoff of each analyst is provided. In particular, closed-form expressions for the probability density functi…

This paper studies the valuation and optimal strategy of convertible bonds as a Dynkin game by using the reflected backward stochastic differential equation method and the variational inequality method. We first reduce such a Dynkin game to an optimal stopping time problem with state constraint, and then in a Markovian…

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…

We first study an optimal stopping problem in which a player (an agent) uses a discrete stopping time in order to stop optimally a payoff process whose risk is evaluated by a (non-linear) $g$-expectation. We then consider a non-zero-sum game on discrete stopping times with two agents who aim at minimizing their respect…

Choquet and minimax expectations are equivalent in European option pricing.

We use probabilistic methods to characterise time dependent optimal stopping boundaries in a problem of multiple optimal stopping on a finite time horizon. Motivated by financial applications we consider a payoff of immediate stopping of "put" type and the underlying dynamics follows a geometric Brownian motion. The op…

Paper solves bond option pricing with credit risk using Black-Scholes equations.

The paper explores arbitrage opportunities in derivative markets under specific conditions.

Introduces SMMV preferences to avoid inconsistency in portfolio selection.

Method constructs CFMMs matching desired payoffs.

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 …

New algorithms reduce regret for online submodular maximization under various conditions.

The paper uncovers the impact of price and payoff autocorrelations in multi-period asset pricing models.

New method uses neural networks for better financial hedging.

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…

Develops a new method for robust risk measurement by averaging nearby payoffs.

In this paper, we consider the pricing and hedging of a financial derivative for an insider trader, in a model-independent setting. In particular, we suppose that the insider wants to act in a way which is independent of any modelling assumptions, but that she observes market information in the form of the prices of va…

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…

New findings show pure strategy equilibria are more robust in a war of attrition game.

We study the use of the multilevel Monte Carlo technique in the context of the calculation of Greeks. The pathwise sensitivity analysis differentiates the path evolution and reduces the payoff's smoothness. This leads to new challenges: the inapplicability of pathwise sensitivities to non-Lipschitz payoffs often makes …

New algorithms for stochastic linear bandits with heavy-tailed payoffs achieve nearly optimal regret.

The game-theoretic risk management framework put forth in the precursor work "Towards a Theory of Games with Payoffs that are Probability-Distributions" (arXiv:1506.07368 [q-fin.EC]) is herein extended by algorithmic details on how to compute equilibria in games where the payoffs are probability distributions. Our appr…

Study of $2 imes 2$ zero-sum games with noisy observations and commitments.

This paper studies robust payoff allocation in submodular games, especially against replication.

We study the problem of repeated play in a zero-sum game in which the payoff matrix may change, in a possibly adversarial fashion, on each round; we call these Online Matrix Games. Finding the Nash Equilibrium (NE) of a two player zero-sum game is core to many problems in statistics, optimization, and economics, and fo…

Study on optimal information acquisition in Kyle model with entropy cost.

Paper reduces dimensionality for robust option pricing in 2-asset markets.

Study dynamic risk measures with distributional uncertainty using optimal transport.

New foundation for Shapley value immune to coalitional manipulations.

We derive a formula for liquidity providers' payoff on DEXs, linking it to volatility.

In an online contract selection problem there is a seller which offers a set of contracts to sequentially arriving buyers whose types are drawn from an unknown distribution. If there exists a profitable contract for the buyer in the offered set, i.e., a contract with payoff higher than the payoff of not accepting any c…

The paper examines bounds for stop-loss payoffs using transformed random variables.

New decision-theoretic calibration error metric improves prediction reliability.

Quantum Monte Carlo speeds up option pricing for complex payoff functions.

New method uses DistRL to estimate entire payoff distribution for financial derivatives.

We consider a sequential learning problem with Gaussian payoffs and side information: after selecting an action $i$, the learner receives information about the payoff of every action $j$ in the form of Gaussian observations whose mean is the same as the mean payoff, but the variance depends on the pair $(i,j)$ (and may…

Novel approach to financial derivatives pricing using rough path theory.

New algorithms improve on bandit feedback in matrix games with unknown payoff matrices.