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 volatility model calibrates SPX & VIX smiles with 6 parameters.
The paper provides formulas for volatility in various models, including rough volatility.
Market maker optimizes SPX and VIX spread using quadratic rough Heston model.
Linking SV and PDV models for better volatility forecasts.
Model captures SPX and VIX volatility surfaces and skew-stickiness ratio.
ARBITER learns SPX-VIX term structures without arbitrage constraints.
A new method for generating SPX and VIX risk scenarios using perturbed optimal transport.
A new model fits SPX and VIX volatility surfaces and term structures efficiently.
Survey of continuous volatility models, focusing on fractional and rough methods.
Proposes a new model for equity options calibration.
Characterizes smiles in delta satisfying specific conditions.
Variational autoencoders (VAEs) defined over SMILES string and graph-based representations of molecules promise to improve the optimization of molecular properties, thereby revolutionizing the pharmaceuticals and materials industries. However, these VAEs are hindered by the non-unique nature of SMILES strings and the c…
This paper proposes a new model for SPX and VIX derivatives markets.
We study a Markov-Functional (MF) interest-rate model with Uncertain Volatility Displaced Diffusion (UVDD) digital mapping, which is consistent with the volatility-smile phenomenon observed in the option market. We first check the impact of pricing Bermudan swaptions by the model. Next, we also investigate the future s…
Text classification on drug SMILES strings yields competitive drug type classification results.
Recurrent neural networks have been widely used to generate millions of de novo molecules in a known chemical space. These deep generative models are typically setup with LSTM or GRU units and trained with canonical SMILEs. In this study, we introduce a new robust architecture, Generative Examination Networks GEN, base…
Extends saddle-point method for large-time volatility smiles.
Extends SABR model for pricing RFR caplets.
The main purpose of this work is to examine the behavior of the implied volatility smiles around jumps, contributing to the literature with a high-frequency analysis of the smile dynamics based on intra-day option data. From our high-frequency SPX S\&P500 index option dataset, we utilize the first three principal compo…
In the Black-Scholes context we consider the probability distribution function (PDF) of financial returns implied by volatility smile and we study the relation between the decay of its tails and the fitting parameters of the smile. We show that, considering a scaling law derived from data, it is possible to get a new f…
We derive a new, exact and transparent expansion for option smiles, which lends itself both to analytical approximation and, perhaps more importantly, to congenial numerical treatments. We show that the skew and the curvature of the smile can be computed as exotic options, for which the Hedged Monte Carlo method is par…
Vanna-Volga is a popular method for the interpolation/extrapolation of volatility smiles. The technique is widely used in the FX markets context, due to its ability to consistently construct the entire Lognormal smile using only three Lognormal market quotes. However, the derivation of the Vanna-Volga method itself is …
DCNN improves volatility smile and skewness calibration without arbitrage constraints.
Our derivation of the distribution function for future returns is based on the risk neutral approach which gives a functional dependence for the European call (put) option price, C(K), given the strike price, K, and the distribution function of the returns. We derive this distribution function using for C(K) a Black-Sc…
We develop a new method to price SOFR futures contracts considering convexity, skew, and smile.
The rBergomi model is improved with a regime switching change of measure to match market VIX smiles.
We derive sharp bounds for the prices of VIX futures using the full information of S&P 500 smiles. To that end, we formulate the model-free sub/superreplication of the VIX by trading in the S&P 500 and its vanilla options as well as the forward-starting log-contracts. A dual problem of minimizing/maximizing certain ris…
In this paper we investigate the asymptotics of forward-start options and the forward implied volatility smile in the Heston model as the maturity approaches zero. We prove that the forward smile for out-of-the-money options explodes and compute a closed-form high-order expansion detailing the rate of the explosion. Fu…
We prove here a general closed-form expansion formula for forward-start options and the forward implied volatility smile in a large class of models, including the Heston stochastic volatility and time-changed exponential Lévy models. This expansion applies to both small and large maturities and is based solely on the p…
We simplify SVI volatility smile constraints for three sub-SVIs without numerical methods.
Paper addresses xVA models for market-implied skew and smile.
Smile-GANs clusters brain MRI scans to reveal disease subtypes and progression.
This study examines how earnings announcements affect option volatility and pricing.
In drug-discovery-related tasks such as virtual screening, machine learning is emerging as a promising way to predict molecular properties. Conventionally, molecular fingerprints (numerical representations of molecules) are calculated through rule-based algorithms that map molecules to a sparse discrete space. However,…
Study examines implied volatility behavior in Bachelier model.
We review and illustrate how the volatility smile translates into a probability distribution, the market-implied probability distribution representing believes priced in. The effects of changes in the smile are examined. Special attention is given to the effects of slope, which might appear at first counter-intuitive. …
We consider the fractional Heston model originally proposed by Comte, Coutin and Renault. Inspired by recent ground-breaking work on rough volatility, which showed that models with volatility driven by fractional Brownian motion with short memory allows for better calibration of the volatility surface and more robust e…
We introduce a new class of local volatility models. Within this framework, we obtain expressions for both (i) the price of any European option and (ii) the induced implied volatility smile. As an illustration of our framework, we perform specific pricing and implied volatility computations for a CEV-like example. Nume…
In our study, we demonstrate the synergy effect between convolutional neural networks and the multiplicity of SMILES. The model we propose, the so-called Convolutional Neural Fingerprint (CNF) model, reaches the accuracy of traditional descriptors such as Dragon (Mauri et al. [22]), RDKit (Landrum [18]), CDK2 (Willigha…
In this work, we aim to gain a better understanding of the volatility smile observed in options markets through microsimulation (MS). We adopt two types of active traders in our MS model: speculators and arbitrageurs, and call and put options on one underlying asset. Speculators make decisions based on their expectatio…
Real life hedging in the Black-Scholes model must be imperfect and if the stock's drift is higher than the risk free rate, leads to a profit on average. Hence the option price is examined as a fair game agreement between the parties, based on expected payoffs and a simple measure of risk. The resulting prices result in…
We study in details the skew of stock option smiles, which is induced by the so-called leverage effect on the underlying -- i.e. the correlation between past returns and future square returns. This naturally explains the anomalous dependence of the skew as a function of maturity of the option. The market cap dependence…
Chemical autoencoders are attractive models as they combine chemical space navigation with possibilities for de-novo molecule generation in areas of interest. This enables them to produce focused chemical libraries around a single lead compound for employment early in a drug discovery project. Here it is shown that the…
A new framework for SPX and VIX hedging that combines AI and market dynamics.
We revisit the ``Smile Dynamics'' problem, which consists in relating the implied leverage (i.e. the correlation of the at-the-money volatility with the returns of the underlying) and the skew of the option smile. The ratio between these two quantities, called ``Skew-Stickiness Ratio'' (SSR) by Bergomi (Smile Dynamics …
SMILE improves explainability of machine learning models.
Improved model for SOFR, SONIA, and ESTR caplets pricing.
We present a stochastic-local volatility model for derivative contracts on commodity futures able to describe forward-curve and smile dynamics with a fast calibration to liquid market quotes. A parsimonious parametrization is introduced to deal with the limited number of options quoted in the market. Cleared commodity …