Banking
Optimal transport for model calibration
Volatility models and SPX/VIX joint dynamics are calibrated using optimal transport theory
Sticky varswaps
Bergomi's skew-stickiness ratio is extended to the setting of variance swaps
Multi-horizon forecasting for limit order books
A multi-step path is forecast using deep learning and parallel computing
Approximating lifetime expected credit loss
Credit rating and collateral value's changes have a measurable impact on creditworthiness
Black basket analytics for mid-curves and spread options
A new solution to calibrate derivatives with multiple strikes is proposed
Deep learning profit and loss
The P&L distribution of a complex derivatives portfolio is computed via deep learning
Axes that matter: PCA with a difference
Differential PCA is introduced to reduce the dimensionality in derivative pricing problems
NLP and transformer models for credit risk
News feeds are factored into models to predict credit events
Risky caplet pricing with backward-looking rates
The Hull-White model for short rates is extended to include compounded rates and credit risk
Capturing the effects of climate change on CVA and FVA
A framework to incorporate climate change risk into derivative prices is presented
The curious case of backward short rates
A discretisation approach for both backward- and forward-looking interest rate derivatives is proposed
A Darwinian theory of model risk
An ex ante methodology is proposed to analyse the model risk pattern for a broad class of structures
An approximate solution for options market-making
An algorithm for the market-making of options on different underlyings is proposed
Generating financial markets with signatures
Signatures can provide the synthetic data to train deep hedging strategies
The arcsine law for quantile derivatives
A new pricing model for quantile-based derivatives, such as Napoleon options, is presented
The step stochastic volatility model
Extreme short-dated skew can be obtained by decomposing it in two parts
An end to replication
Convexity adjustments can be valued with an analytical formula, avoiding replication arguments
The Fundamental Review of the Trading Book and fat tails
Conservative capital buffers may not be enough to protect against tail events
What is the volatility of an Asian option?
An adjustment for the volatility smile in Asian options is proposed
The cost of hedging XVA
HVA is framed consistently with other valuation adjustments
Credit migration: generating generators
A stochastic time change helps the modelling of rating transition
SABR smiles for RFR caplets
The SABR model for volatility is adapted to price risk-free rate caplets
Hedging valuation adjustment: fact and friction
Transaction costs’ impact on hedging can now be quantified