arXiv research

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…

Study competition in OTC CDS market through CCP and interdealer choice models.

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…

Model analyzes OTC market making with reputation feedback.

Model analyzes how reputation feedback affects OTC market making.

The research presented in this work is motivated by some recent papers regarding hedging and valuation of financial securities subject to funding costs, collateralization and counterparty credit risk. Our goal is to provide a sound theoretical underpinning for some results presented in these papers by developing a unif…

Model predicts OTC dealers' trading behavior using historical data.

In this paper we discuss the issue of computation of the bilateral credit valuation adjustment (CVA) under rating triggers, and in presence of ratings-linked margin agreements. Specifically, we consider collateralized OTC contracts, that are subject to rating triggers, between two parties -- an investor and a counterpa…

Optimal liquidation model reduces trading costs in OTC markets.

Backward SDEs help price XVA for OTC derivatives.

Paper uses reinforcement learning to optimize bid-ask spreads in OTC markets.

The extended Wild sums considered in this article generalize the classi- cal Wild sums of statistical physics. We first show how to obtain explicit solutions for the evolution equation of a large system where the interactions are given by a single, but general, interacting kernel which involves m components, for a fixe…

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

Counterparty risk denotes the risk that a party defaults in a bilateral contract. This risk not only depends on the two parties involved, but also on the risk from various other contracts each of these parties holds. In rather informal markets, such as the OTC (over-the-counter) derivative market, institutions only rep…

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.

In most OTC markets, a small number of market makers provide liquidity to other market participants. More precisely, for a list of assets, they set prices at which they agree to buy and sell. Market makers face therefore an interesting optimization problem: they need to choose bid and ask prices for making money while …

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…

ABM simulates OTC government bond market dynamics, enhancing liquidity and stability.

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.

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.

The present work studies and analyzes general defaultable OTC contract in presence of a contingent CSA, which is a theoretical counterparty risk mitigation mechanism of switching type that allows the counterparty of a general OTC contract to switch from zero to full/perfect collateralization and switch back whenever sh…

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.

We study the impact of central clearing of over-the-counter (OTC) transactions on counterparty exposures in a market with OTC transactions across several asset classes with heterogeneous characteristics. The impact of introducing a central counterparty (CCP) on expected interdealer exposure is determined by the tradeof…

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…

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…

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…

We introduce a modified non-linear heat equation $\partial_t u = Δu + Γu$ as a substitute of $\log P_t f$ where $P_t$ is the heat semigroup. We prove an exponential decay of $Γu$ under the Bakry Emery curvature condition $CD(K,\infty)$ and prove the Li-Yau inequality $-Δu_t \leq \frac{n}{2t}$ under the Bakry Emery curv…

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.