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.
A new model shows joint calibration of SPX and VIX smiles is possible.
DCNN improves volatility smile and skewness calibration without arbitrage constraints.
Improved Heston model produces steeper smile for short maturities.
A new volatility model calibrates SPX & VIX smiles with 6 parameters.
We present a stochastic-local volatility model for derivative contracts on commodity futures able to describe forward-curve and smile dynamics with a fast calibration to liquid market quotes. A parsimonious parametrization is introduced to deal with the limited number of options quoted in the market. Cleared commodity …
The study calibrates VIX and VXX options using a multi-factor model.
Study improves caplet calibration for 1Y maturity using different models.
In some options markets (e.g. commodities), options are listed with only a single maturity for each underlying. In others, (e.g. equities, currencies), options are listed with multiple maturities. In this paper, we provide an algorithm for calibrating a pure jump Markov martingale model to match the market prices of Eu…
Calibrates historical and implied correlations in energy markets.
We consider the fractional Heston model originally proposed by Comte, Coutin and Renault. Inspired by recent ground-breaking work on rough volatility, which showed that models with volatility driven by fractional Brownian motion with short memory allows for better calibration of the volatility surface and more robust e…
The rBergomi model is improved with a regime switching change of measure to match market VIX smiles.
Linking SV and PDV models for better volatility forecasts.
The paper proposes an expanded version of the Local Variance Gamma model of Carr and Nadtochiy by adding drift to the governing underlying process. Still in this new model it is possible to derive an ordinary differential equation for the option price which plays a role of Dupire's equation for the standard local volat…
Paper addresses xVA models for market-implied skew and smile.
We propose a new static parameterization of the implied volatility surface which is constructed by using polynomials of sigmoid functions combined with some other terms. This parameterization is flexible enough to fit market implied volatilities which demonstrate smile or skew. An arbitrage-free calibration algorithm i…
Weighted Monte Carlo prices exotic options calibrating the probabilities of previously generated paths by a regular Monte Carlo to fit a set of option premiums. When only vanilla call and put options and forward prices are considered, the Martingale condition might not be preserved. This paper shows that this is indeed…
A new approach for pricing FX options that uses a single model for all markets.
We present a novel Monte Carlo based LSV calibration algorithm that applies to all stochastic volatility models, including the non-Markovian rough volatility family. Our framework overcomes the limitations of the particle method proposed by Guyon and Henry-Labordère (2012) and theoretically guarantees a variance reduct…
The Heston model stands out from the class of stochastic volatility (SV) models mainly for two reasons. Firstly, the process for the volatility is non-negative and mean-reverting, which is what we observe in the markets. Secondly, there exists a fast and easily implemented semi-analytical solution for European options.…
We introduce a novel multi-factor Heston-based stochastic volatility model, which is able to reproduce consistently typical multi-dimensional FX vanilla markets, while retaining the (semi)-analytical tractability typical of affine models and relying on a reasonable number of parameters. A successful joint calibration t…
Efficiently calibrates SABR/LIBOR models to real market caplets and swaptions data.
We introduce a local volatility model for the valuation of options on commodity futures by using European vanilla option prices. The corresponding calibration problem is addressed within an online framework, allowing the use of multiple price surfaces. Since uncertainty in the observation of the underlying future price…
The paper models natural gas futures prices and volatility, using Monte Carlo and reinforcement learning.
We describe a robust calibration algorithm of a set of SSVI slices (i.e. a set of 3 SSVI parameters attached to each option maturity available on the market), which grants that these slices are free of Butterfly and Calendar-Spread arbitrage. Given such a set of consistent SSVI parameters, we show that …
We develop and test a fast and accurate semi-analytical formula for single-name default swaptions in the context of a shifted square root jump diffusion (SSRJD) default intensity model. The model can be calibrated to the CDS term structure and a few default swaptions, to price and hedge other credit derivatives consist…
The Multi Variate Mixture Dynamics model is a tractable, dynamical, arbitrage-free multivariate model characterized by transparency on the dependence structure, since closed form formulae for terminal correlations, average correlations and copula function are available. It also allows for complete decorrelation between…
A simple graphical model for correlated defaults is proposed, with explicit formulas for the loss distribution. Algebraic geometry techniques are employed to show that this model is well posed for default dependence: it represents any given marginal distribution for single firms and pairwise correlation matrix. These t…
The paper provides formulas for volatility in various models, including rough volatility.
Characterizes smiles in delta satisfying specific conditions.
Proposes a new framework for invariant quadratic P&L predictions in option books.
This paper demonstrates the efficiency of using Edgeworth and Gram-Charlier expansions in the calibration of the Libor Market Model with Stochastic Volatility and Displaced Diffusion (DD-SV-LMM). Our approach brings together two research areas; first, the results regarding the SV-LMM since the work of Wu and Zhang (200…
The paper proposes a neural network method to calibrate LSV models without interpolation.
Deep learning accelerates Heston model calibration.
The paper examines the short-time implied volatility of additive processes and finds key parameters.
Variational autoencoders (VAEs) defined over SMILES string and graph-based representations of molecules promise to improve the optimization of molecular properties, thereby revolutionizing the pharmaceuticals and materials industries. However, these VAEs are hindered by the non-unique nature of SMILES strings and the c…
Improved pricing of vanilla options using modified Adams method and sinh-acceleration.
The rough Bergomi model introduced by Bayer, Friz and Gatheral has been outperforming conventional Markovian stochastic volatility models by reproducing implied volatility smiles in a very realistic manner, in particular for short maturities. We investigate here the dynamics of the VIX and the forward variance curve ge…
We study a Markov-Functional (MF) interest-rate model with Uncertain Volatility Displaced Diffusion (UVDD) digital mapping, which is consistent with the volatility-smile phenomenon observed in the option market. We first check the impact of pricing Bermudan swaptions by the model. Next, we also investigate the future s…
A new method for generating SPX and VIX risk scenarios using perturbed optimal transport.
Text classification on drug SMILES strings yields competitive drug type classification results.
Recurrent neural networks have been widely used to generate millions of de novo molecules in a known chemical space. These deep generative models are typically setup with LSTM or GRU units and trained with canonical SMILEs. In this study, we introduce a new robust architecture, Generative Examination Networks GEN, base…
We analyse the behaviour of the implied volatility smile for options close to expiry in the exponential Lévy class of asset price models with jumps. We introduce a new renormalisation of the strike variable with the property that the implied volatility converges to a non-constant limiting shape, which is a function of …
How to reconcile the classical Heston model with its rough counterpart? We introduce a lifted version of the Heston model with n multi-factors, sharing the same Brownian motion but mean reverting at different speeds. Our model nests as extreme cases the classical Heston model (when n = 1), and the rough Heston model (w…
We introduce a tractable multi-currency model with stochastic volatility and correlated stochastic interest rates that takes into account the smile in the FX market and the evolution of yield curves. The pricing of vanilla options on FX rates can be performed effciently through the FFT methodology thanks to the affinit…
Extends saddle-point method for large-time volatility smiles.
In this study we suggest a portfolio selection framework based on option-implied information and multivariate non-Gaussian models. The proposed models incorporate skewness, kurtosis and more complex dependence structures among stocks log-returns than the simple correlation matrix. The two models considered are a multiv…
Unified model for equity option pricing and interest-rate risk assessment.
New model captures time-varying volatility with stochastic exponential tails.