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.
Paper predicts international trade flows using machine learning and factorization models.
The study examines cross-border lending behavior from G7 countries, showing changes in driving factors after the 2008 financial crisis.
We analyze the counterparty risk embedded in CDS contracts, in presence of a bilateral margin agreement. First, we investigate the pricing of collateralized counterparty risk and we derive the bilateral Credit Valuation Adjustment (CVA), unilateral Credit Valuation Adjustment (UCVA) and Debt Valuation Adjustment (DVA).…
We present a class of Lévy processes for modelling financial market fluctuations: Bilateral Gamma processes. Our starting point is to explore the properties of bilateral Gamma distributions, and then we turn to their associated Lévy processes. We treat exponential Lévy stock models with an underlying bilateral Gamma pr…
The purpose of this paper is introducing rigorous methods and formulas for bilateral counterparty risk credit valuation adjustments (CVA's) on interest-rate portfolios. In doing so, we summarize the general arbitrage-free valuation framework for counterparty risk adjustments in presence of bilateral default risk, as de…
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…
In the framework of bilateral Gamma stock models we seek for adequate option pricing measures, which have an economic interpretation and allow numerical calculations of option prices. Our investigations encompass Esscher transforms, minimal entropy martingale measures, -optimal martingale measures, bilateral Esscher…
We introduce the general arbitrage-free valuation framework for counterparty risk adjustments in presence of bilateral default risk, including default of the investor. We illustrate the symmetry in the valuation and show that the adjustment involves a long position in a put option plus a short position in a call option…
Method solves optimisation problems on non-Riemannian surfaces with bilateral curvature bounds.
Estimates boundaries for acceptable bilateral gamma risk in financial markets.
We show how the cost of funding the collateral in a particular set up can be equal to the Bilateral Valuation Adjustment with the "funded" probability of default, leading to the definition of a Funded Bilateral Valuation Adjustment (FBVA). That set up can also be viewed by an investor as an effective way to restructure…
In this short note we show that the existence of bilaterally symmetric extremal Kähler metrics on .
Unified model for network risks, including bilateral and central clearing, with practical applications.
Study minimax regret in bilateral trade with heavy-tailed valuations.
TradeMech nets trades without changing counterparty relationships.
Study on gamma-related OU processes with simulation methods.
Learning big data by matrix decomposition always suffers from expensive computation, mixing of complicated structures and noise. In this paper, we study more adaptive models and efficient algorithms that decompose a data matrix as the sum of semantic components with incoherent structures. We firstly introduce "GO decom…
Bielecki and Rutkowski (2014) introduced and studied a generic nonlinear market model, which includes several risky assets, multiple funding accounts and margin accounts. In this paper, we examine the pricing and hedging of contract both from the perspective of the hedger and the counterparty with arbitrary initial end…
Study models opaque financial markets using multi-agent simulation.
Bielecki and Rutkowski (2014) introduced and studied a generic nonlinear market model, which includes several risky assets, multiple funding accounts and margin accounts. In this paper, we examine the pricing and hedging of contract both from the perspective of the hedger and the counterparty with arbitrary initial end…
Our previous results are extended to the case of the margin account, which may depend on the contract's value for the hedger and/or the counterparty. The present work generalizes also the papers by Bergman (1995), Mercurio (2013) and Piterbarg (2010). Using the comparison theorems for BSDEs, we derive inequalities for …
Thompson Sampling with bilateral uncertainty improves performance in Bayesian Optimization.
Paper improves ISDA margin calculation using LSMC.
We analyze the practical consequences of the bilateral counterparty risk adjustment. We point out that past literature assumes that, at the moment of the first default, a risk-free closeout amount will be used. We argue that the legal (ISDA) documentation suggests in many points that a substitution closeout should be u…
Although initially originated as a totally empirical relationship to explain the volume of trade between two partners, gravity equation has been the focus of several theoretic models that try to explain it. Specialization models are of great importance in providing a solid theoretic ground for gravity equation in bilat…
A three-dimensional extension of the structural default model with firms' values driven by correlated diffusion processes is presented. Green's function based semi-analytical methods for solving the forward calibration problem and backward pricing problem are developed. These methods are used to analyze bilateral count…
Three situations in which filtering theory is used in mathematical finance are illustrated at different levels of detail. The three problems originate from the following different works: 1) On estimating the stochastic volatility model from observed bilateral exchange rate news, by R. Mahieu, and P. Schotman; 2) A stat…
We compare two different bilateral counterparty valuation adjustment (BVA) formulas. The first formula is an approximation and is based on subtracting the two unilateral Credit Valuation Adjustment (CVA)'s formulas as seen from the two different parties in the transaction. This formula is only a simplified representati…
Analyzes valuation of derivative claims with asymmetric funding costs and WWR.
The paper analyzes regret in bilateral trade mechanisms without prior valuations.
Low-rank structure have been profoundly studied in data mining and machine learning. In this paper, we show a dense matrix 's low-rank approximation can be rapidly built from its left and right random projections and , or bilateral random projection (BRP). We then show power scheme can further…
TraderTalk uses LLMs to simulate human trading interactions in financial markets.
We depart from the usual methods for pricing contracts with the counterparty credit risk found in most of the existing literature. In effect, typically, these models do not account for either systemic effects or at-first-default contagion and postulate that the contract value at default equals either the risk-free valu…
We obtain an explicit formula for the bilateral counterparty valuation adjustment of a credit default swaps portfolio referencing an asymptotically large number of entities. We perform the analysis under a doubly stochastic intensity framework, allowing for default correlation through a common jump process. The key ins…
We consider the framework proposed by Burgard and Kjaer (2011) that derives the PDE which governs the price of an option including bilateral counterparty risk and funding. We extend this work by relaxing the assumption of absence of transaction costs in the hedging portfolio by proposing a cost proportional to the amou…
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…
Proposes a Coulomb-like model for international trade flows, fitting real-world data.
Analyzing real data on international trade covering the time interval 1950-2000, we show that in each year over the analyzed period the network is a typical representative of the ensemble of maximally random weighted networks, whose directed connections (bilateral trade volumes) are only characterized by the product of…
Achieving international food security requires improved understanding of how international trade networks connect countries around the world through the import-export flows of food commodities. The properties of food trade networks are still poorly documented, especially from a multi-network perspective. In particular,…
Method estimates treatment effects in dyadic data with unknown confounders.
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…
This paper develops an XVA (costs) analysis of centrally cleared trading, parallel to the one that has been developed in the last years for bilateral transactions. We introduce a dynamic framework that incorporates the sequence of cash-flows involved in the waterfall of resources of a clearing house. The total cost of …
We discuss and clarify the XVA modelling framework specified in the paper "MVA by replication and regression" (Risk Magazine, May 2015) for including bilateral credit risk and funding costs in derivative pricing, and in doing so we rectify two key errors in the valuation adjustments accounting for costs of capital and …
The paper tackles adaptive policy selection to maximize social welfare, achieving optimal regret bounds.
BDC compresses both sample size and dimensionality of large datasets.
MCFNet recovers spatial detail and fuses it with semantic information for real-time segmentation.
In this note we sketch an initial tentative approach to funding costs analysis and management for contracts with bilateral counterparty risk in a simplified setting. We depart from the existing literature by analyzing the issue of funding costs and benefits under the assumption that the associated risks cannot be hedge…
A multi-dimensional extension of the structural default model with firms' values driven by diffusion processes with Marshall-Olkin-inspired correlation structure is presented. Semi-analytical methods for solving the forward calibration problem and backward pricing problem in three dimensions are developed. The model is…