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.
The BBF, SABR, and rough SABR formulas provide nearly arbitrage-free implied vol approximations.
The paper calibrates a model to market quotes efficiently and arbitrage-free.
Generates consistent IV surfaces using VAEs and SDE models.
We introduce a regularization approach to arbitrage-free factor-model selection. The considered model selection problem seeks to learn the closest arbitrage-free HJM-type model to any prespecified factor-model. An asymptotic solution to this, a priori computationally intractable, problem is represented as the limit of …
Develops a nonparametric model for arbitrage-free pricing of illiquid derivatives.
A new method constructs smooth, arbitrage-free option surfaces efficiently.
We present an Hilbert space formulation for a set of implied volatility models introduced in \cite{BraceGoldys01} in which the authors studied conditions for a family of European call options, varying the maturing time and the strike price an , to be arbitrage free. The arbitrage free conditions give a system of…
Continuous-time interpolation of volatility surfaces preserving mixtures and arbitrage-free.
The paper extends a variance gamma model to quadratic functions, reducing arbitrage and computational costs.
In this article we propose a generalisation of the recent work of Gatheral and Jacquier on explicit arbitrage-free parameterisations of implied volatility surfaces. We also discuss extensively the notion of arbitrage freeness and Roger Lee's moment formula using the recent analysis by Roper. We further exhibit an arbit…
Proposes a new framework for discount models.
This paper generalizes the framework for arbitrage-free valuation of bilateral counterparty risk to the case where collateral is included, with possible re-hypotecation. We analyze how the payout of claims is modified when collateral margining is included in agreement with current ISDA documentation. We then specialize…
Generative diffusion models forecast implied vol surfaces without arbitrage issues.
The problem of existence of arbitrage free and monotone CDO term structure models is studied. Conditions for positivity and monotonicity of the corresponding Heath-Jarrow-Morton-Musiela equation for the -forward rates with the use of the Milian type result are formulated. Two state spaces are taken into account - of…
We consider the classical problem of building an arbitrage-free implied volatility surface from bid-ask quotes. We design a fast numerical procedure, for which we prove the convergence, based on the Sinkhorn algorithm that has been recently used to solve efficiently (martingale) optimal transport problems.
Proposes a method to construct risk-neutral marginals from arbitrage-free option prices.
Extends saddle-point method for large-time volatility smiles.
Deep learning framework for bond and yield curve forecasting with no-arbitrage constraints.
Conic martingales refer to Brownian martingales evolving between bounds. Among other potential applications, they have been suggested for the sake of modeling conditional survival probabilities under partial information, as usual in reduced-form models. Yet, conic martingale default models have a special feature; in co…
ARBITER learns SPX-VIX term structures without arbitrage constraints.
Reflected geometric Brownian motion models are not arbitrage-free.
Taleb (2018) claimed a novel approach to evaluating the quality of probabilistic election forecasts via no-arbitrage pricing techniques and argued that popular forecasts of the 2016 U.S. Presidential election had violated arbitrage boundaries. We show that under mild assumptions all such political forecasts are arbitra…
In this paper we show how to approximate a Heath-Jarrow-Morton dynamics for the forward prices in commodity markets with arbitrage-free models which have a finite dimensional state space. Moreover, we recover a closed form representation of the forward price dynamics in the approximation models and derive the rate of c…
In this article, we show how to calibrate the widely-used SVI parameterization of the implied volatility surface in such a way as to guarantee the absence of static arbitrage. In particular, we exhibit a large class of arbitrage-free SVI volatility surfaces with a simple closed-form representation. We demonstrate the h…
A new method calculates accurate SABR model option prices and deltas.
Develops a new model for pricing without arbitrage opportunities.
Method interpolates option prices and volatilities without arbitrage.
Revisits stochastic collocation with exponential splines for option pricing.
New method calibrates eSSVI volatility surfaces without arbitrage.
We re-examine and extend the findings from the recent paper by Dumitrescu, Quenez and Sulem (2018) who studied American and game options in a particular market model using the nonlinear arbitrage-free pricing approach developed in El Karoui and Quenez (1997). In the first part, we provide a detailed study of unilateral…
We study the Hull-White model for the term structure of interest rates in the presence of volatility uncertainty. The uncertainty about the volatility is represented by a set of beliefs, which naturally leads to a sublinear expectation and a G-Brownian motion. The main question in this setting is how to find an arbitra…
All DeFi markets are essentially CFMMs with increasing invariants.
The method constructs arbitrage-free option surfaces from noisy quotes using Chebyshev bases and a fog post-fit layer.
Paper derives Thiele's equation for unit-linked policies in a stochastic volatility model.
The goal is to re-examine and extend the findings from the recent paper by Dumitrescu, Quenez and Sulem (2017) who studied game options within the nonlinear arbitrage-free pricing approach developed in El Karoui and Quenez (1997). We consider the setup introduced in Kim, Nie and Rutkowski (2018) where contracts of an A…
The paper values reinsurance contracts for dynamic catastrophe claims without arbitrage.
Financial models are studied where each asset may potentially lose value relative to any other. Conditioning on non-devaluation, each asset can serve as proper numéraire and classical valuation rules can be formulated. It is shown when and how these local valuation rules can be aggregated to obtain global arbitrage-fre…
Paper uses RL for dynamic swaption hedging, outperforming traditional methods.
We propose a new static parameterization of the implied volatility surface which is constructed by using polynomials of sigmoid functions combined with some other terms. This parameterization is flexible enough to fit market implied volatilities which demonstrate smile or skew. An arbitrage-free calibration algorithm i…
This paper is devoted to the application of an -minimisation technique to construct an arbitrage-free call-option surface. We propose a nononparametric approach to obtaining model-free call option surfaces that are perfectly consistent with market quotes and free of static arbitrage. The approach is inspired from…
This paper gives examples of explicit arbitrage-free term structure models with Lévy jumps via state price density approach. By generalizing quadratic Gaussian models, it is found that the probability density function of a Lévy process is a "natural" scale for the process to be the state variable of a market.
In this paper we ask whether, given a stock market and an illiquid derivative, there exists arbitrage-free prices at which an utility-maximizing agent would always want to buy the derivative, irrespectively of his own initial endowment of derivatives and cash. We prove that this is false for any given investor if one c…
Two ML approaches learn local volatility surfaces from option prices, with GP being arbitrage-free.
This paper is devoted to the application of B-splines to volatility modeling, specifically the calibration of the leverage function in stochastic local volatility models and the parameterization of an arbitrage-free implied volatility surface calibrated to sparse option data. We use an extension of classical B-splines …
Simulates multi-asset spot and option markets using normalizing flows.
Paper proposes a method to robustly estimate volatility from OTM options.
The main results are two characterisations of log-concave densities in terms of the collection of lift zonoids corresponding to a peacock. These notions are recalled and connected to arbitrage-free asset pricing in financial mathematics.
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.