arXiv research

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…

Study on gamma-related OU processes with simulation methods.

Estimates boundaries for acceptable bilateral gamma risk in financial markets.

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, $p$-optimal martingale measures, bilateral Esscher…

We offer new formulas for European option pricing under tempered stable processes.

Method solves optimisation problems on non-Riemannian surfaces with bilateral curvature bounds.

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 $\mathbb{CP}^2\sharp 2\bar{\mathbb{CP}^2}$.

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.

Paper predicts international trade flows using machine learning and factorization models.

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.

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…

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).…

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…

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…

The paper fits a seven-parameter GTS distribution to financial data.

Analyzes valuation of derivative claims with asymmetric funding costs and WWR.

The paper analyzes regret in bilateral trade mechanisms without prior valuations.

If Gamma is any finite graph, then the unlabelled configuration space of n points on Gamma, denoted UC^n(Gamma), is the space of n-element subsets of Gamma. The braid group of Gamma on n strands is the fundamental group of UC^n(Gamma). We apply a discrete version of Morse theory to these UC^n(Gamma), for any n and any …

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…

Low-rank structure have been profoundly studied in data mining and machine learning. In this paper, we show a dense matrix $X$'s low-rank approximation can be rapidly built from its left and right random projections $Y_1=XA_1$ and $Y_2=X^TA_2$, or bilateral random projection (BRP). We then show power scheme can further…

TraderTalk uses LLMs to simulate human trading interactions in financial markets.

Introduces a new spectral geometry framework with dissipative data.

Let Gamma be a non-elementary Kleinian group acting on the closed n-dimensional unit ball and assume that its Poincare series converges at the exponent alpha. Let M_Gamma be the Gamma-quotient of the open unit ball. We consider certain families E = {E_1,...,E_p} of open subsets of M_Gamma such that M_Gamma minus the un…

We consider complex projective space P^{n} and a smooth closed curve gamma in P^{n}. Harvey and Lawson have defined the notion of the projective hull \hat{K} of a compact subset K in P^n. This concept is an analogue of the polynomial hull of compact subsets of C^{n}. In the present note we study the relation between th…

Develops Bayesian inference methods for gamma models.

Let Gamma_k be the lower central series of a surface group Gamma of a compact surface S with one boundary component. A simple question to ponder is whether a mapping class of S can be determined to be pseudo-Anosov given only the data of its action on Gamma/Gamma_k for some k. In this paper, to each mapping class f whi…

Mixture models with Gamma and or inverse-Gamma distributed mixture components are useful for medical image tissue segmentation or as post-hoc models for regression coefficients obtained from linear regression within a Generalised Linear Modeling framework (GLM), used in this case to separate stochastic (Gaussian) noise…

Let P be a locally finite circle packing in the plane invariant under a non-elementary Kleinian group Gamma and with finitely many Gamma-orbits. When Gamma is geometrically finite, we construct an explicit Borel measure on the plane which describes the asymptotic distribution of small circles in P, assuming that either…

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 discrete subgroups Gamma of the simply connected Lie group SU~(1,1), the universal cover of SU(1,1), of finite level, i.e. the subgroup intersects the centre of SU~(1,1) in a subgroup of finite index, this index is called the level of the group. The Killing form induces a Lorentzian metric of constant curva…

Let G=SO(n,1) and Gamma a geometrically finite Zariski dense subgroup of G which is contained in an arithmetic subgroup of G. Denoting by Gamma(q) the principal congruence subgroup of Gamma of level q, and fixing a positive number λ_0 strictly smaller than (n-1)^2/4, we show that, as q tends to infinity along primes, t…

There is an established bijection between finite-index subgroups Gamma of Gamma(2) and bipartite graphs on surfaces, or, equivalently, certain triples of permutations. We utilize this relationship to study both congruence and noncongruence subgroups in terms of the corresponding graphs. We show some elementary criteria…

New formulas derived for variance gamma model option pricing.

The weak variance-alpha-gamma process is a multivariate Lévy process constructed by weakly subordinating Brownian motion, possibly with correlated components with an alpha-gamma subordinator. It generalises the variance-alpha-gamma process of Semeraro constructed by traditional subordination. We compare three calibrati…

Researchers extend Gamma index theorem to non-compact spacetimes.

For i = 1,2, let Gamma_i be a lattice in a simply connected, solvable Lie group G_i, and let X_i be a connected Lie subgroup of G_i. The double cosets Gamma_igX_i provide a foliation F_i of the homogeneous space Gamma_i\G_i. Let f be a continuous map from Gamma_1\G_1 to Gamma_2\G_2 whose restriction to each leaf of F_1…

The article prices exchange options using variance gamma-like models.

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…

Let Gamma be a finitely generated, amenable group. Using an idea of E Ghys, we prove that if Gamma has a nontrivial, orientation-preserving action on the real line, then Gamma has an infinite, cyclic quotient. (The converse is obvious.) This implies that if Gamma has a faithful action on the circle, then some finite-in…