Skewing Quanto with Simplicityq-fin.MF
Simple method solves Quanto Skew problem.
problem Quanto Skew problem in Equities and FX.
method Analytical method that accommodates Equity and FX volatility skew.
result Highly efficient and fast performance.
On-device research index
arXiv research
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.
169,341 papers · 148 categories
Trend · papers per month
29 results for “quantos”
This research uses empirical copulas to price quanto options, showing significant differences from traditional models.
problem The dependence relation between currency and asset prices affects quanto option pricing.
method Empirical copulas are used to model the dependence between currency and asset prices.
result Empirical copulas provide non-negligible pricing differences compared to traditional models.
Bayesian methods improve Quanto option pricing accuracy.
problem Improving Quanto option pricing accuracy using Bayesian methods.
method Bayesian estimation of parameters and Monte Carlo simulation.
result Bayesian methods outperform other methods in Quanto option pricing.
The paper models quanto weather and energy derivatives using Ornstein-Uhlenbeck processes and develops methods to hedge them.
problem Valuation and hedging of quanto derivatives on temperature and electricity.
method Developed a coupled model using Ornstein-Uhlenbeck processes and Conditional Least Square method for parameter estimation.
result Explicit and semi-explicit formulas for quanto options and hedging strategies are derived.
Develops formulas for pricing European quanto options in a local volatility FX-LIBOR model.
problem Pricing European quanto options in a local volatility FX-LIBOR model with skew/smile effects.
method Derives dynamics of foreign LIBOR rates, considers local volatility models, uses expansions around log-normal dynamics.
result Derives approximation formulas of Black-Scholes type with accurate error estimation.
The paper explores local-correlation models for pricing complex financial contracts.
problem Calibrating synthetic quanto forward contracts and composite options.
method Design on-line calibration procedures for local and stochastic volatility models.
result Calibration performance of local-correlation models compared to simpler approximations.
Study quantos in energy markets using HJM framework and Malliavin calculus.
problem Analyzing sensitivity of energy quanto options.
method Using HJM framework and Malliavin calculus, derive delta and cross-gamma formulas.
result Extension of existing work on quanto options in energy markets.
Study compares models for pricing multi-strike quanto call options with SV, SC, and SER.
problem Pricing multi-strike quanto call options with stochastic volatility, correlation, and exchange rates.
method Comparative analysis of SV, SC, and SER models; Monte Carlo simulation; Milstein scheme; antithetic variates; correlation risk parameters.
result GARCH-Jump SV, Weibull SC, and Ornstein Uhlenbeck (OU) SER model combination performs best.
Modified model for Quanto CDS pricing with stochastic recovery and reduced complexity.
problem Modeling Quanto CDS with stochastic recovery and reduced complexity of interest rate.
method Modified Itkin, Shcherbakov, and Veygman (2019) model with RBF-FD method.
result Influence of recovery rate volatility and mean-reversion on Quanto CDS spread.
Pricing Exchange Rate Options and Quanto Caps in the Cross-Currency Random Field LIBOR Market Modelq-fin.PR
Develops a new model for cross-currency derivatives pricing.
problem Pricing cross-currency derivatives in a complex market model.
method Introduces a random field LIBOR market model to handle uncertainty in forward LIBOR rates.
result Derives exact and approximate pricing formulas for various derivatives.
We explore inverse and quanto inverse crypto options, their pricing, and applications.
problem Market incompleteness in crypto options trading.
method Comparison of direct and inverse options, and introduction of currency-protected 'quanto' options.
result Pricing and hedging characteristics of inverse and quanto inverse options in a Black-Scholes framework.
New model explains CDS price discrepancies in foreign and domestic economies.
problem Explaining discrepancies in Quanto CDS prices.
method Proposes a model with four stochastic factors and jumps-at-default, derives 4D PDEs, solves numerically.
result Qualitative explanation of CDS price discrepancies.
Quanto Option Pricing on a Multivariate Levy Process Model with a Generative Artificial Intelligenceq-fin.MF
Study uses AI to price exotic options with a new Levy process model.
problem Pricing exotic options with a non-Gaussian Levy process model.
method Introduced a new multivariate Levy process model and used a generative AI model to estimate the probability density function.
result Developed a method to price quanto options using a trained generative AI model.
Modified perturbation method removes non-smoothness in solving Black-Scholes equations.
problem Non-smoothness in solving Black-Scholes equations.
method Variable transformations and homotopy perturbation method.
result Excellent agreement with exact solutions for Black-Scholes and multi-asset options.
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 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 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…
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…
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…
Perpetual Futures Pricingq-fin.PR
Derives pricing formulas for perpetual futures contracts.
problem Ensuring fair pricing of perpetual futures contracts without expiration.
method Explicit expressions derived for various types of perpetual contracts, including linear, inverse, and quantos futures.
result Futures price is the risk-neutral expectation of the spot price sampled at a random time reflecting funding payments.
Developing a semi-analytical approximation for general default intensity models
problem Accurate and efficient pricing of default intensity models
method Path-integral formalism
result Accurate results for the Black-Karasinski model
New concept of illiquidity linked to credit risk, using Jarrow & Turnbull's analogy.
problem Understanding illiquidity in financial markets, especially with credit risk.
method Introduces a constraint-based notion of illiquidity, using Jarrow & Turnbull's foreign exchange analogy.
result A new mathematical framework for understanding illiquidity in financial markets.
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…
Study on implied volatility of Inverse options under stochastic volatility models.
problem Short-time behavior and skew of implied volatility for Inverse European options.
method Malliavin calculus, anticipating Itô's formula, asymptotic analysis.
result Asymptotic formula for skew of implied volatility, extending to Quanto-Inverse options.
The paper models cryptocurrency price and volatility with jumps and fractional volatility.
problem Empirical evidence shows jumps in cryptocurrency price and volatility.
method Fractional stochastic volatility model with jumps and short-term volatility dependency.
result Fractional stochastic volatility models outperform other models in pricing and hedging cryptocurrency options.
This paper examines pricing and hedging strategies for cross-currency equity protection swaps.
problem Dynamic requirements from EPS buyers in cross-currency equity protection swaps.
method Detailed analysis of two hedging paradigms, including separate and aggregated returns, with consideration of different types of returns.
result Proposes various hedging strategies with practical implications for EPS providers and investors.
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…