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.
Repo rates are explained as a convexity effect from bond and derivative discount rates.
The general and special repo rates are related with the prices of the European call- and American put-options. The evaluation takes into account specific business models of the parties in the repo agreement and the law restrictions. Using the repo-option relation, an alternative to the Black-Scholes method of option pr…
A repurchase agreement lets investors borrow cash to buy securities. Financier only lends to securities' market value after a haircut and charges interest. Repo pricing is characterized with its puzzling dual pricing measures: repo haircut and repo spread. This article develops a repo haircut model by designing haircut…
Cash collateral is perfect in that it provides simultaneous counterparty credit risk protection and derivatives funding. Securities are imperfect collateral, because of collateral segregation or differences in CSA haircuts and repo haircuts. Moreover, the collateral rate term structure is not observable in the repo mar…
Although not a formal pricing consideration, gap risk or hedging errors are the norm of derivatives businesses. Starting with the gap risk during a margin period of risk of a repurchase agreement (repo), this article extends the Black-Scholes-Merton option pricing framework by introducing a reserve capital approach to …
We study the semilinear partial differential equation (PDE) associated with the non-linear BSDE characterizing buyer's and seller's XVA in a framework that allows for asymmetries in funding, repo and collateral rates, as well as for early contract termination due to counterparty credit risk. We show the existence of a …
Repo dealers' market power affects bond prices by up to 2 percentage points.
We develop a framework for computing the total valuation adjustment (XVA) of a European claim accounting for funding costs, counterparty credit risk, and collateralization. Based on no-arbitrage arguments, we derive backward stochastic differential equations (BSDEs) associated with the replicating portfolios of long an…
Leverage is strongly related to liquidity in a market and lack of liquidity is considered a cause and/or consequence of the recent financial crisis. A repurchase agreement is a financial instrument where a security is sold simultaneously with an agreement to buy it back at a later date. Repurchase agreements (repos) ma…
Model estimates LIBOR rates and finds COVID-19 spread spike due to credit risk.
Examines SOFR derivatives pricing and hedging post-LIBOR discontinuation.
We study how network structure affects the dynamics of collateral in presence of rehypothecation. We build a simple model wherein banks interact via chains of repo contracts and use their proprietary collateral or re-use the collateral obtained by other banks via reverse repos. In this framework, we show that total col…
There are more than eight hundred interest rates published in China bond market every day. Which are the benchmark interest rates that have broad influences on most interest rates is a major concern for economists. In this paper, multi-variable Granger causality test is developed and applied to construct a directed net…
We discuss the binary nature of funding impact in derivative valuation. Under some conditions, funding is either a cost or a benefit, i.e., one of the lending/borrowing rates does not play a role in pricing derivatives. When derivatives are priced, considering different lending/borrowing rates leads to semi-linear BSDE…
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 …
The study calculates securities lending haircuts and indemnification costs.
Proposes HBayes for hierarchical Bayesian recommendation learning.
In this note we show how to replicate a stylized CDS with a repurchase agreement and an asset swap. The latter must be designed in such a way that, on default of the issuer, it is terminated with a zero close-out amount. This break clause can be priced using the well known unilateral credit/debit valuation adjustment f…
This work develops an agent-based model for the study of how the leverage through the use of repurchase agreements can function as a mechanism for the propagation and amplification of financial shocks in a financial system. Based on the analysis of financial intermediaries in the repo and interbank lending markets duri…
A neural network method for financial data nowcasting.
We take the holistic approach of computing an OTC claim value that incorporates credit and funding liquidity risks and their interplays, instead of forcing individual price adjustments: CVA, DVA, FVA, KVA. The resulting nonlinear mathematical problem features semilinear PDEs and FBSDEs. We show that for the benchmark v…
Unified framework for fixed-income pricing and liability replication.
The paper addresses XVA valuation under market crises using a renewal process.
The paper explains the fair basis in bond-CDS trading during financial crises.
Paper analyzes fire sales in a network of banks using VWAP and LOB pricing.
TradeMech nets trades without changing counterparty relationships.
Tree-Query uses LLMs to discover causal relationships in a transparent, interpretable manner.
FedAUX improves Federated Learning by better using unlabeled data.
Improved robustness for deep neural networks with tighter bounds and attacks.
FinGPT is an open-source financial LLM for democratizing financial data.
SAGE generates subsurface velocity models from sparse well logs and seismic images.
End-to-end autonomous driving perception learns latent features for better performance.
PatchGT uses non-trainable graph patches to improve graph representation learning.
Neural network for subgraph similarity computation with pruning.
LeJEPA provides a scalable, theory-driven approach to self-supervised learning.
Paper quantifies uncertainties in EIS spectra of SOFCs, proposing VB method for online monitoring.
Active-GRPO improves molecular optimization by actively deciding when to imitate or self-improve.
The paper models SOFR and EFFR dynamics, reconciling diffusive and piecewise paths.
The study proposes algorithms to minimize rating discordance in missing data.
Overrides of credit ratings are important correctives of ratings that are determined by statistical rating models. Financial institutions and banking regulators agree on this because on the one hand errors with ratings of corporates or banks can have fatal consequences for the lending institutions and on the other hand…
Model credit ratings using economic states with Markov chains.
The paper analyzes how learning rate affects SGD and provides insights into optimal rates.
This paper models short rates with jumps using PDEs.
The paper explores using set-level ratings for better user-item preference prediction in recommender systems.
In this survey paper we discuss recent advances on short interest rate models which can be formulated in terms of a stochastic differential equation for the instantaneous interest rate (also called short rate) or a system of such equations in case the short rate is assumed to depend also on other stochastic factors. Ou…
We first show that there are in fact triangular arbitrage opportunities in the spot foreign exchange markets, analyzing the time dependence of the yen-dollar rate, the dollar-euro rate and the yen-euro rate. Next, we propose a model of foreign exchange rates with an interaction. The model includes effects of triangular…
A novel approach models rating transitions using Lie groups and Deep Learning.
Following widely used in visual recognition concept of relative attributes, the article establishes definition of the relative PCA attributes for a class of objects defined by vectors of their parameters. A new rating model (RELARM) is built using relative PCA attribute ranking functions for rating object description a…