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 paper models quanto weather and energy derivatives using Ornstein-Uhlenbeck processes and develops methods to hedge them.
This research uses empirical copulas to price quanto options, showing significant differences from traditional models.
Develops a new model for cross-currency derivatives pricing.
We develop an expansion approach for the pricing of European quanto options written on LIBOR rates (of a foreign currency). We derive the dynamics of the system of foreign LIBOR rates under the domestic forward measure and then consider the price of the quanto option. In order to take the skew/smile effect observed in …
Study compares models for pricing multi-strike quanto call options with SV, SC, and SER.
Simple method solves Quanto Skew problem.
In recent years there has been an advent of quanto options in energy markets. The structure of the payoff is rather a different type from other markets since it is written as a product of an underlying energy index and a measure of temperature. In the HJM framework, by adopting the futures energy dynamics, we use the M…
The problem of quantile hedging for basket derivatives in the Black-Scholes model with correlation is considered. Explicit formulas for the probability maximizing function and the cost reduction function are derived. Applicability of the results for the widely traded derivatives as digital, quantos, outperformance and …
The paper explores local-correlation models for pricing complex financial contracts.
In the paper, the pricing of Quanto options is studied, where the underlying foreign asset and the exchange rate are correlated with each other. Firstly, we adopt Bayesian methods to estimate unknown parameters entering the pricing formula of Quanto options, including the volatility of stock, the volatility of exchange…
We propose a new model for pricing Quanto CDS and risky bonds. The model operates with four stochastic factors, namely: hazard rate, foreign exchange rate, domestic interest rate, and foreign interest rate, and also allows for jumps-at-default in the FX and foreign interest rates. Corresponding systems of PDEs are deri…
The risk minimizing problem in the multidimensional Black-Scholes framework is studied. Specific formulas for the minimal risk function and the cost reduction function for basket derivatives are shown. Explicit integral representations for the risk functi…
We explore inverse and quanto inverse crypto options, their pricing, and applications.
We revisit the problem of pricing and hedging plain vanilla single-currency interest rate derivatives using multiple distinct yield curves for market coherent estimation of discount factors and forward rates with different underlying rate tenors. Within such double-curve-single-currency framework, adopted by the market…
In this paper we modify the model of Itkin, Shcherbakov and Veygman, (2019) (ISV2019), proposed for pricing Quanto Credit Default Swaps (CDS) and risky bonds, in several ways. First, it is known since the Lehman Brothers bankruptcy that the recovery rate could significantly vary right before or at default, therefore, i…
Study uses AI to price exotic options with a new Levy process model.
Modified perturbation method removes non-smoothness in solving Black-Scholes equations.
Based on forward curves modelled as Hilbert-space valued processes, we analyse the pricing of various options relevant in energy markets. In particular, we connect empirical evidence about energy forward prices known from the literature to propose stochastic models. Forward prices can be represented as linear functions…
Derives pricing formulas for perpetual futures contracts.
Developing a semi-analytical approximation for general default intensity models
New concept of illiquidity linked to credit risk, using Jarrow & Turnbull's analogy.
Gaussian copulas are widely used in the industry to correlate two random variables when there is no prior knowledge about the co-dependence between them. The perturbed Gaussian copula approach allows introducing the skew information of both random variables into the co-dependence structure. The analytical expression of…
The duality principle in option pricing aims at simplifying valuation problems that depend on several variables by associating them to the corresponding dual option pricing problem. Here, we analyze the duality principle for options that depend on several assets. The asset price processes are driven by general semimart…
In this paper we analyse financial implications of exchangeability and similar properties of finite dimensional random vectors. We show how these properties are reflected in prices of some basket options in view of the well-known put-call symmetry property and the duality principle in option pricing. A particular atten…
This paper describes a consistent and arbitrage-free pricing methodology for bespoke CDO tranches. The proposed method is a multi-factor extension to the (Li 2009) model, and it is free of the known flaws in the current standard pricing method of base correlation mapping. This method assigns a distinct market factor to…
The paper models cryptocurrency price and volatility with jumps and fractional volatility.
This paper examines pricing and hedging strategies for cross-currency equity protection swaps.
Study on implied volatility of Inverse options under stochastic volatility models.
Credit Default Swaps (CDS) on a reference entity may be traded in multiple currencies, in that protection upon default may be offered either in the domestic currency where the entity resides, or in a more liquid and global foreign currency. In this situation currency fluctuations clearly introduce a source of risk on C…
Researchers found the Wigner derivative and its inverse are equal for spherical tetrahedra.
The paper shows objective derivatives are covariant derivatives on Riemannian metrics.
Computes derivatives of sections in vector bundles using Lie derivatives.
Paper proposes auction method for smart derivatives to avoid disputes.
Derivatives impact U.S. banking sector's systemic risk, but loan and leverage ratios are more significant.
This paper deals with the concept of curvature of framed space curves, their higher-order derivatives, variations, and co-rotational derivatives. We realize that parametrizing rotation tensor using the Gibbs vector is effective in deriving a closed form formula to obtain any order derivative of the curvature tensor as …
Schwarzian derivative connects to Euler-Lagrange equations in variational calculus.
Paper develops formulas for shape derivatives in wave scattering.
A simple theory of the covariant derivatives, deformed derivatives and relative covariant derivatives of multivector and multiform fields is presented using algebraic and analytical tools developed in previous papers.
Study compares Indian derivatives markets and finds NSE outperforming BSE.
Former physicists share insights on derivatives in interviews.
Introduces Darboux-Lie derivative for fiber bundles.
New derivations on diffeological spaces are not smooth, expanding tangent space definitions.
Develops derived differential geometry theory.
Derives spacetime regularity under specific curvature conditions.
Approximates derivative pricing under fractional stochastic volatility.
In this article, we combine replication pricing with expectation pricing for derivative trades that are partially collateralized by cash. The derivatives are replicated by underlying assets and cash, using repurchasing agreement (repo) and margining, which incur funding costs. We derive a partial differential equation …
We introduce and study a construction of higher derived brackets generated by a (not necessarily inner) derivation of a Lie superalgebra. Higher derived brackets generated by an element of a Lie superalgebra were introduced in our earlier work. Examples of higher derived brackets naturally appear in geometry and mathem…
We characterize the Lie derivative of spinor fields from a variational point of view by resorting to the theory of the Lie derivative of sections of gauge-natural bundles. Noether identities from the gauge-natural invariance of the first variational derivative of the Einstein(--Cartan)--Dirac Lagrangian provide restric…