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.
Optimizes risk-neutral probabilities for derivative pricing.
Generative model uses DDPMs for risk-neutral derivative pricing.
Paper introduces benchmark-neutral pricing for long-term contracts.
Project estimates risk-neutral dependence from option prices.
Develops a binary tree model for option pricing with skew dynamics.
Deep Hedging learns risk-neutral vol dynamics for option pricing.
Generative model prices options and extracts risk-neutral densities.
Proposes a method to construct risk-neutral marginals from arbitrage-free option prices.
The risk-neutral option pricing method under GARCH intensity model is examined. The GARCH intensity model incorporates the characteristics of financial return series such as volatility clustering, leverage effect and conditional asymmetry. The GARCH intensity option pricing model has flexibility in changing the volatil…
This paper highlights the role of risk neutral investors in generating endogenous bubbles in derivatives markets. We find that a market for derivatives, which has all the features of a perfect market except completeness and has some risk neutral investors, can exhibit extreme price movements which represent a violation…
The paper bounds payoffs and option prices in discrete models.
Two new methods for option pricing without or with a riskless asset.
In this paper we consider the pricing of variable annuities (VAs) with guaranteed minimum withdrawal benefits. We consider two pricing approaches, the classical risk-neutral approach and the benchmark approach, and we examine the associated static and optimal behaviors of both the investor and insurer. The first model …
Regulations impose idiosyncratic capital and funding costs for holding derivatives. Capital requirements are costly because derivatives desks are risky businesses; funding is costly in part because regulations increase the minimum funding tenor. Idiosyncratic costs mean no single measure makes derivatives martingales f…
Solves ambiguity in incomplete markets by minimizing price measure entropy.
A new method calculates implied volatilities without using option prices.
Method uses trinomial trees to price nontraditional options.
This paper surveys options pricing under arithmetic Brownian motion and derives formulas for various types of options.
A risk-neutral valuation framework is developed for pricing and hedging in-play football bets based on modelling scores by independent Poisson processes with constant intensities. The Fundamental Theorems of Asset Pricing are applied to this set-up which enables us to derive novel arbitrage-free valuation formulæ for c…
This paper provides a methodology for fast and accurate pricing of the long-dated contracts that arise as the building blocks of insurance and pension fund agreements. It applies the recursive marginal quantization (RMQ) and joint recursive marginal quantization (JRMQ) algorithms outside the framework of traditional ri…
The paper shows that benchmark-neutral pricing minimizes option prices.
We study the formation of derivative prices in equilibrium between risk-neutral agents with heterogeneous beliefs about the dynamics of the underlying. Under the condition that the derivative cannot be shorted, we prove the existence of a unique equilibrium price and show that it incorporates the speculative value of p…
Derives pricing formulas for perpetual futures contracts.
The paper solves classical problems in option pricing.
iCOS method estimates risk-neutral densities and option prices without model assumptions.
Method determines asset prices in incomplete markets to optimize portfolios.
Based on empirical market data, a stochastic volatility model is proposed with volatility driven by fractional noise. The model is used to obtain a risk-neutrality option pricing formula and an option pricing equation.
This paper studies the valuation of European contingent claims with short selling bans under the equal risk pricing (ERP) framework proposed in Guo and Zhu (2017) where analytical pricing formulae were derived in the case of monotonic payoffs under risk-neutral measures. We establish a unified framework for this new pr…
We develop a new nonparametric approach for estimating the risk-neutral density of asset prices and reformulate its estimation into a double-constrained optimization problem. We evaluate our approach using the S\&P 500 market option prices from 1996 to 2015. A comprehensive cross-validation study shows that our approac…
Novel method prices call options using Pearson diffusion processes.
Framework improves risk neutral density estimation in illiquid markets.
The study finds that specific distributions can be used for risk-neutral valuation in Heston's SV model.
This paper proposes a new geometric framework for asset pricing.
Proof that under simple assumptions, such as constraints of Put-Call Parity, the probability measure for the valuation of a European option has the mean derived from the forward price which can, but does not have to be the risk-neutral one, under any general probability distribution, bypassing the Black-Scholes-Merton …
Bayesian MS-VAR process improves option pricing models.
In this paper, we determine a representative agent model based on risk-neutral information. The main idea is that the pricing kernel is transition independent, which is supported by the well-known capital asset pricing theory. Determining the representative agent model is closely related to the eigenpair problem of a s…
Unified framework matches equity and bond yields.
We study Nash equilibria for inventory-averse high-frequency traders (HFTs), who trade to exploit information about future price changes. For discrete trading rounds, the HFTs' optimal trading strategies and their equilibrium price impact are described by a system of nonlinear equations; explicit solutions obtain aroun…
Deriving option prices from operational-time Markov lattices
The paper models and prices cyber insurance risks, distinguishing idiosyncratic, systematic, and systemic risks.
Reflected geometric Brownian motion models are not arbitrage-free.
Catastrophe risk is a major threat faced by individuals, companies, and entire economies. Catastrophe (CAT) bonds have emerged as a method to offset this risk and a corresponding literature has developed that attempts to provide a market-consistent pricing methodology for these and other long-dated, insurance-type cont…
Paper compares MCMC-based copula methods for exchange option pricing.
In this work, we study the value of an Asian option in the case of exponential Levy markets. More specifically, we are interested in the NIG (normal inverse Gaussian) the VG (variance gamma) models. The exponential Levy models produce incomplete markets. There are therefore an infinite number of equivalent martingale m…
The price of a stock will rarely follow the assumed model and a curious investor or a Regulatory Authority may wish to obtain a probability model the prices support. A risk neutral probability for the stock's price at time is determined in closed form from the prices before without assuming a price…
We derive a recursive formula for arithmetic Asian option prices with finite observation times in semimartingale models. The method is based on the relationship between the risk-neutral expectation of the quadratic variation of the return process and European option prices. The computation of arithmetic Asian option pr…
Value adjustment of uncollateralized trades is determined within a risk-neutral pricing framework. When hedging such trades, investors cannot freely trade protection on their own name, thus facing an incomplete market. This fact is reflected in the non-uniqueness of the pricing measure, which is only constrained by the…
We consider infinite dimensional optimization problems motivated by the financial model called Arbitrage Pricing Theory. Using probabilistic and functional analytic tools, we provide a dual characterization of the super-replication cost. Then, we show the existence of optimal strategies for investors maximizing their e…