arXiv research

New algorithm optimizes DAGs by swapping node pairs to avoid cycles.

We introduce a topological combinatorial game called the Region Smoothing Swap Game. The game is played on a game board derived from the connected shadow of a link diagram on a (possibly non-orientable) surface by smoothing at crossings. Moves in the game are performed on regions of the diagram and can switch the direc…

We introduce a recoupling theory for virtual braided trees. This recoupling theory can be utilized to incorporate swap gates into anyonic models of quantum computation.

Using a simplistic model of juggling based on physics, a natural map is constructed from the set of periodic juggling patterns (or site swaps) to links. We then show that all topological links can be juggled.

DGNN predicts financial margin calls under stress tests.

Debt swaps improve financial networks by optimizing clearing payments and stability.

Paper generalizes pricing and hedging of volatility swaps in stochastic models.

Swapping debt contracts can mitigate risk in financial networks.

We derive an arbitrage free relationship between recovery swap rates, digital default swap spreads and conventional CDS spreads, and argue that the fair forward recovery rate used in recovery swaps must contain a convexity premium over the expected recovery value.

The paper prices swaps on generalized variance measures for multiple assets.

This study reviews techniques to estimate volatility and price Variance Swaps.

F. Labourie [arXiv:1212.5015] characterized the Hitchin components for $\operatorname{PSL}(n, \mathbb{R})$ for any $n>1$ by using the swapping algebra, where the swapping algebra should be understood as a ring equipped with a Poisson bracket. We introduce the rank $n$ swapping algebra, which is the quotient of the swap…

In this paper, we model financial markets with semi-Markov volatilities and price covarinace and correlation swaps for this markets. Numerical evaluations of vari- nace, volatility, covarinace and correlations swaps with semi-Markov volatility are presented as well. The novelty of the paper lies in pricing of volatilit…

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…

Exact relationships found between ATM slope, volatility swap, and zero vanna.

A note on setting swap parameters for traders.

Paper solves no-swap regret minimization for combinatorial bandits with polylogarithmic dependence on N.

We consider the high-dimensional sparse linear regression problem of accurately estimating a sparse vector using a small number of linear measurements that are contaminated by noise. It is well known that the standard cadre of computationally tractable sparse regression algorithms---such as the Lasso, Orthogonal Matchi…

The paper extends the market price of risk for electricity swap contracts, incorporating jump risk.

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…

Paper introduces a new pricing method for electricity swaps and options.

Improved bounds for multicalibration and omniprediction in online and distributional settings.

A variance swap is a derivative with a path-dependent payoff which allows investors to take positions on the future variability of an asset. In the idealised setting of a continuously monitored variance swap written on an asset with continuous paths it is well known that the variance swap payoff can be replicated exact…

The SABR model is shortly presented and the volatility swap explained. The fair value for a volatility swap is then computed using the usual theory in financial mathematics. An analytical solution using confluent hypergeometric functions is found. The solution is then verified using Rama Cont's functional calculus.

Paper examines pricing and hedging for cross-currency swaps referencing backward-looking rates.

Lower bound found for volatility swap in SABR model.

This paper proposes swaps on two important new measures of generalized variance, namely the maximum eigen-value and trace of the covariance matrix of the assets involved. We price these generalized variance swaps for financial markets with Markov-modulated volatilities. We consider multiple assets in the portfolio for …

We study the fair strike of a discrete variance swap for a general time-homogeneous stochastic volatility model. In the special cases of Heston, Hull-White and Schobel-Zhu stochastic volatility models we give simple explicit expressions (improving Broadie and Jain (2008a) in the case of the Heston model). We give condi…

In this paper, Malliavin calculus is applied to arrive at exact formulas for the difference between the volatility swap strike and the zero vanna implied volatility for volatilities driven by fractional noise. To the best of our knowledge, our estimate is the first to derive the rigorous relationship between the zero v…

This paper investigates the pricing and hedging of variance swaps under a $3/2$ volatility model. Explicit pricing and hedging formulas of variance swaps are obtained under the benchmark approach, which only requires the existence of the numéraire portfolio. The growth optimal portfolio is the numéraire portfolio and u…

Study finds discrepancies in open interest reporting for Bitcoin perpetual swaps.

There are many studies on development of models for analyzing some derivatives such as credit default swaps .

In this paper, we consider the problem of pricing discretely-sampled variance swaps based on a hybrid model of stochastic volatility and stochastic interest rate with regime-switching. Our modelling framework extends the Heston stochastic volatility model by including the CIR stochastic interest rate and model paramete…

Paper explores volatility swaps in rough volatility models.

Italian banks use swaps to hedge against rising interest rates, offsetting losses on debt securities.

We derive a general multivariate theory for realised characteristics of `model-free discretisation-invariant swaps', so-called because the standard no-arbitrage assumption of martingale forward prices is sufficient to derive fair-value swap rates for such characteristics which have no jump or discretisation errors. Thi…

We develop robust pricing and hedging of a weighted variance swap when market prices for a finite number of co--maturing put options are given. We assume the given prices do not admit arbitrage and deduce no-arbitrage bounds on the weighted variance swap along with super- and sub- replicating strategies which enforce t…

The rank $n$ swapping algebra is the Poisson algebra defined on the ordered pairs of points on a circle using the linking numbers, where a subspace of $(\mathbb{K}^n \times \mathbb{K}^{n*})^r/\operatorname{GL}(n,\mathbb{K})$ is its geometric mode. In this paper, we find an injective Poisson homomorphism from the Poisso…

This paper considers the case of pricing discretely-sampled variance swaps under the class of equity-interest rate hybridization. Our modeling framework consists of the equity which follows the dynamics of the Heston stochastic volatility model, and the stochastic interest rate is driven by the Cox-Ingersoll-Ross (CIR)…

Interest rate market models, like the LIBOR market model, have the advantage that the basic model quantities are directly observable in financial markets. Inflation market models extend this approach to inflation markets, where zero-coupon and year-on-year inflation-indexed swaps are the basic observable products. For …

Proposes a new method for completing swap cycles in decentralized exchanges.

Empirical study finds variance swap rate is affine in spot variance for S&P500 data.

DECS tool assesses swap rates of DEXes and Fusion outperforms competitors.

In this work we derive an approximated no-arbitrage market valuation formula for Constant Maturity Credit Default Swaps (CMCDS). We move from the CDS options market model in Brigo (2004), and derive a formula for CMCDS that is the analogous of the formula for constant maturity swaps in the default free swap market unde…

Develops a novel framework for pricing variance swaps in multi-asset stochastic volatility models.

We introduce here for the first time the long-term swap rate, characterised as the fair rate of an overnight indexed swap with infinitely many exchanges. Furthermore we analyse the relationship between the long-term swap rate, the long-term yield, see Biagini et al. [2018], Biagini and Härtel [2014], and El Karoui et a…

In this theoretical paper, I propose creation of a venture bank, able to multiply the capital of a venture capital firm by at least 47 times, without requiring access to the Federal Reserve or other central bank apart from settlement. This concept rests on obtaining default swap instruments on loans in order to create …

Study on collateral currency impact in differential swaps valuation.