Paper proposes embedding models to capture semantic similarities of categorical attributes in financial bonds.
problem Challenges in finding similar bonds due to overshadowing of categorical non-financial attributes.
method Embedding models to capture semantic similarities of categorical attributes.
result Improves risk modeling and curve construction via sparse-issuer augmentation.
Paper finds political networks reduce bond issuance costs in China.
problem The financial value of within-government political networks in China.
method Using municipal leaders' working experience to measure political networks, the study examines the effect on bond issuance yield spreads.
result Political networks reduce bond issuance yield spreads by improving issuer credit ratings, especially in less developed financial markets.
Green bond leaks impact equity markets, altering investor reactions.
problem Green bond leaks affect equity market reactions.
method Identified 259 instances of pre-announcement leaks in 2,036 green bond headlines.
result News leaks significantly alter equity trading dynamics and investor reactions.
EMDLOT predicts bond defaults better than traditional methods.
problem Lack of interpretability and irregular temporal dependencies in financial data.
method Integrates time-series and textual data, uses Time-Aware LSTM, soft clustering, and multi-level attention.
result EMDLOT outperforms traditional and deep learning benchmarks in recall, F1-score, and mAP.
BondBERT improves sentiment analysis for bond markets.
problem Misleading sentiment models for bond markets due to domain-specific dynamics.
method Fine-tuned transformer model on bond-specific news.
result BondBERT produces positive correlations with bond returns and higher forecasting accuracy.
CoCos can increase financial fragility in certain network structures.
problem The effectiveness of CoCos in enhancing financial stability depends on the network structure.
method Analysis of phase transitions in a network of interconnected banks.
result CoCos can increase financial fragility under certain network structures.
The paper explains the fair basis in bond-CDS trading during financial crises.
problem Large basis trading losses during financial crises are not explained by reduced form models.
method Dynamic spread model with bond repo financing, economic capital approach.
result Unhedged and unhedgeable residual jump to default risk exists, affecting fair basis level.
This paper uses CausalGANs and RL with LLM to predict bond yields.
problem Challenges in financial bond yield forecasting due to data scarcity and market conditions.
method Proposes a novel framework combining CausalGANs, RL, and LLM for synthetic data generation and trading signals.
result Improves forecasting performance over existing methods with low Mean Absolute Error.
News attention to financial intermediaries and crises predicts excess bond premium and macroeconomic movements.
problem Drivers of the excess bond premium (EBP).
method News attention to 180 topics captures up to 80% of EBP variation and forecasts macroeconomic movements.
result News attention to financial intermediaries and crises drives up the EBP and predicts macroeconomic downturns.
In this paper, we implement a stochastic deflator with five economic and financial risk factors: interest rates, market price of risk, stock prices, default intensities, and convenience yields. We examine the deflator with different financial assets, such as stocks, zero-coupon bonds, vanilla options, and corporate cou…
Paper proposes a supervised similarity framework for corporate bonds using RF proximities.
problem Challenges in measuring similarity for corporate bonds due to noisy data and lack of ground truth.
method Proposes a supervised similarity framework using Random Forest for corporate bonds, introducing a novel metric to evaluate similarities.
result Random Forest outperforms other methods in evaluating similarities for corporate bonds.
The paper examines how CoCo bonds can enhance financial stability in interconnected banking systems.
problem Enhancing financial stability in interconnected banking systems.
method Financial network model with contingent convertible (CoCo) debt obligations.
result Replacing unsecured interbank debt with CoCo debt decreases systemic risk and increases bank shareholder value.
This paper investigates the presence of long memory in corporate bond and stock indices of six European Union countries from July 1998 to February 2015. We compute the Hurst exponent by means of the DFA method and using a sliding window in order to measure long range dependence. We detect that Hurst exponents behave di…
Modeling longevity bonds with a Vasicek model for better risk management.
problem Managing future uncertainty related to population longevity.
method Developed a state-space Vasicek model for zero-coupon longevity bonds.
result Unobserved instantaneous interest rate shows mean reverting behavior.
Approximates discounted moments for financial products using polynomial expansions.
problem Approximating discounted moments of stochastic processes for financial applications.
method High-order power series expansion of the infinitesimal generator.
result Error decreases to around 10 to 100 times machine precision for higher orders.
This paper tackles missing data in Burundian bond market yield curves.
problem Missing data challenges accurate yield curve construction in Burundian sovereign bond market.
method Exploration of data limitations, proposing and testing various imputation methods (LR, Previous value, miss-Forest, Next value).
result Linear Regression method performs best across variables, approximating normal distribution for error values.
A new method estimates corporate bond defaults in financial networks efficiently.
problem Challenges in valuing corporate bonds in interconnected financial systems.
method Bi-Level Importance Sampling with Splitting
result The method efficiently estimates rare default events in financial networks.
Study explores financial market linkages between Japan and US markets.
problem Inconsistency in empirical studies regarding financial market causal linkages.
method Causal discovery methods including VAR-LiNGAM and LPCMCI with domain knowledge.
result VAR-LiNGAM reveals causal influences among financial markets, while LPCMCI identifies potential latent confounders.
Financial markets provide a natural quantitative lab for understanding some of the most advanced human behaviours. Among them is the use of mathematical tools known as financial instruments. Besides money, the two most fundamental financial instruments are bonds and equities. More than 30 years ago Mehra and Prescott f…
The process of liquidity provision in financial markets can result in prolonged exposure to illiquid instruments for market makers. In this case, where a proprietary position is not desired, pro-actively targeting the right client who is likely to be interested can be an effective means to offset this position, rather …
Paper analyzes pricing model for bonds with early redemption.
problem Analyzing pricing of bonds with early redemption features.
method Structural approach for mathematical modeling of bond prices.
result Existence and uniqueness of default and early redemption boundaries proved.
Paper uses IGA for efficient pricing of financial derivatives, comparing it to FDM and FEM.
problem Efficiently pricing complex financial derivatives with high accuracy.
method Isogeometric Analysis (IGA) for solving nonlinear Black-Scholes PDEs.
result IGA provides very accurate solutions with fewer knots, significantly reducing computational time.
After the beginning of the credit and liquidity crisis, financial institutions have been considering creating a convertible-bond type contract focusing on Capital. Under the terms of this contract, a bond is converted into equity if the authorities deem the institution to be under-capitalized. This paper discusses this…
This article describes and explores taxes and debt in finance. Here a situation is thought about, where tax payments would qualify to be considered as debt. Using this principle we can infer that it is possible to create and price a type of bond (Tax Normalization Guarantee) for companies, which would allow them to ent…
We apply the formalism of the continuous time random walk (CTRW) theory to financial tick data of the bond futures transacted in Korean Futures Exchange (KOFEX) market. For our case, the tick dynamical behaviors of the returns and volatility for bond futures are treated particularly at the long-time limit. The volatili…
The paper introduces CoCoCat bonds for multi-region natural catastrophes, accounting for complex dependencies.
problem Valuation of multi-region contingent convertible bonds under complex dependencies.
method Developed a model accounting for inter-regional dependencies using change-of-measure techniques.
result Significant impact of inter-regional dependencies on CoCoCat bond pricing.
This paper uses crypto derivatives data to estimate yield curves for cryptocurrencies.
problem Estimating yield curves for cryptocurrencies without bond markets.
method Using mathematical tools and data from cryptocurrency derivatives markets.
result Yield curves can be constructed for cryptocurrencies using derivative data.
Network analysis improves risk assessment for surety bonds.
problem Network effects in surety bonds increase risk assessment complexity.
method Modelled contractor network as directed graph, extended Friedkin-Johnsen model with stochastic process.
result Network effects increase average risk for surety organizations.
For the last two decades, most financial markets have undergone an evolution toward electronification. The market for corporate bonds is one of the last major financial markets to follow this unavoidable path. Traditionally quote-driven i.e., dealer-driven) rather than order-driven, the market for corporate bonds is st…
Through a long-period analysis of the inter-temporal relations between the French markets for credit default swaps (CDS), shares and bonds between 2001 and 2008, this article shows how a financial innovation like CDS could heighten financial instability. After describing the operating principles of credit derivatives i…
Revisits Jarrow & Turnbull model for credit and liquidity risk.
problem Modeling credit and liquidity risk in financial markets.
method Uses foreign exchange analogy and partially observable exchange rate.
result Derives tractable term structure models and explicit valuation formulae.
The paper predicts financial markets using news text and semantic network analysis.
problem Predicting financial markets with news data.
method Semantic network analysis of news text to assess economic keywords' importance.
result The index captures financial market phases and predicts returns and volatilities.
Using a recently introduced method to quantify the time varying lead-lag dependencies between pairs of economic time series (the thermal optimal path method), we test two fundamental tenets of the theory of fixed income: (i) the stock market variations and the yield changes should be anti-correlated; (ii) the change in…
This paper examines how ESG factors influence sovereign bond yields and credit ratings.
problem The impact of ESG factors on sovereign bond yields and credit ratings is not fully understood.
method The study identifies relevant ESG indicators and compares their importance in bond pricing and credit ratings.
result ESG factors, particularly the G and S pillars, are more important for credit ratings than the E pillar.
Study examines how COVID-19 affects bond yields using network filtering methods.
problem Impact of COVID-19 on sovereign bond yields.
method Network filtering methods applied to a correlation matrix of sovereign bond yields.
result Mean correlation decreases across all filtering methods during the COVID-19 period.
This paper analyzes extreme flooding risks and proposes insurance and bond solutions.
problem Severe rise in magnitude and frequency of floods causing catastrophic losses.
method Extremes analysis using Peaks-Over-Threshold method and Point Process model; Value-at-Risk (VaR) and Conditional VaR (CVaR) estimation; Flood zoning insurance and catastrophic bond design.
result Developed flood risk vulnerability and threat analysis considering geography and economic factors; Proposed flood zoning insurance and catastrophic bond design.
Study reveals stylized facts in German bond futures markets.
problem Understanding market dynamics in German bond futures.
method Analyzed tick-by-tick data of four German bond futures contracts.
result Uncovered commonalities and unique characteristics across different futures.
In this paper we present a rigorously motivated pricing equation for derivatives, including general cash collateralization schemes, which is consistent with quoted market bond prices. Traditionally, there have been differences in how instruments with similar cash flow structures have been priced if their definition fal…
We investigate default-free bond markets where the standard relationship between a possibly existing bank account process and the term structure of bond prices is broken, i.e. the bank account process is not a valid numéraire. We argue that this feature is not the exception but rather the rule in bond markets when star…
Quantum computing improves fill probability estimation in bond trading.
problem Estimating fill probabilities in complex financial markets with uncertainties.
method Quantum learning algorithms applied to real bond trading data.
result Quantum-enhanced models achieve up to 34% better performance in fill prediction.
We introduce Hermite fractional financial markets, where market uncertainties are described by multidimensional Hermite motions. Hermite markets include as particular cases financial markets driven by multivariate fractional Brownian motion and multivariate Rosenblatt motion. Conditions for no-arbitrage and market comp…
We propose a general framework for the simultaneous modeling of equity, government bonds, corporate bonds and derivatives. Uncertainty is generated by a general affine Markov process. The setting allows for stochastic volatility, jumps, the possibility of default and correlation between different assets. We show how to…
We discuss risk measures representing the minimum amount of capital a financial institution needs to raise and invest in a pre-specified eligible asset to ensure it is adequately capitalized. Most of the literature has focused on cash-additive risk measures, for which the eligible asset is a risk-free bond, on the grou…
Survey and new results link hydrodynamics, molecular physics, and financial engineering.
problem Understanding financial engineering topics like Asian options and volatility swaps.
method Linking Kevin waves, Klein-Kramers, and Kolmogorov equations to financial models.
result Corrected the original solution of the Kolmogorov equation.
Study properties of Black-Scholes equation solutions for puttable bonds with credit risk.
problem Properties of solutions to Black-Scholes equation for puttable bonds with credit risk.
method Solution representation, min-max estimation, gradient estimates, strict monotonicity analysis.
result Derivation of analytical pricing formulae for puttable bonds with credit risk.
This study models Burundi's bond market yield curve using Nelson-Siegel and Svensson models.
problem Modeling the yield curve of Burundian bond market for financial analytics.
method Collected treasury securities auction reports, computed zero-coupon rates, and applied Nelson-Siegel and Svensson models.
result Nelson-Siegel model is optimal for Burundian yield curve modeling.
Pricing Chinese convertible bonds using Monte Carlo simulation and dynamic programming.
problem Pricing Chinese convertible bonds accurately.
method Monte Carlo simulation and dynamic programming with regression and backward induction.
result An underpriced strategy significantly outperforms benchmarks.
The study improves stock market valuation using volatility and earnings data.
problem Improving stock market valuation metrics.
method Time series model for asset returns, multivariate kernel density estimation, linear regression.
result The valuation measure is an improvement over Shiller's P/E ratio.