Banking
Analytic risk-free rates option pricing with smile and skew
An arbitrage-free short-rate model for backward-looking compounded rates is presented
Smile-consistent basket skew
An analytic approximation for the implied volatility surface of basket options is introduced
A robust stochastic volatility model for interest rates
A swaption pricing model based on a single-factor Cheyette model is shown to fit accurately
How a machine learning model closed a hidden FX arbitrage gap
MUFG Securities quant uses variational inference to control the mid volatility of options
Does the term structure of the at-the-money skew really follow a power law?
A power law can fit the ATM skew, but struggles with short maturities
Obtaining arbitrage-free FX implied volatility by variational inference
An ML-based algorithm that provides implied volatilities from bid-ask prices is proposed
The factor Heath-Jarrow-Morton term structure
A framework for rates that links real-world and risk-neutral measures is presented
The quintic Ornstein-Uhlenbeck model for joint SPX and VIX calibration
A new model that jointly fits the smiles of VIX and SPX is presented
Information geometry of risks and returns
An innovative product design framework and its geometric interpretation is introduced
A model for small basket equities financing
A haircut model for equity baskets based on credit and equity indexes is introduced
The carbon equivalence principle: methods for project finance
A method to price the environmental impact of financial products is proposed
Funding, wealth transfer and financial stability in the post-Libor era
Adjusting RFR with a funding premium may aid economic growth and stability
Dealing with multi-currency inventory risk in FX cash markets
A market-making model that considers correlation, transaction costs and market impact is presented
Momentum transformer: an interpretable deep learning trading model
An attention-based deep learning model for trading is presented
CMS pricing: overdue annuities
An RFR-based pricing and risk management model for CMS and its derivatives is presented
Collateralised exposure modelling: bridging the gap risk
Concentration, leverage and correlations may affect a collateralised equity swap portfolio
Pricing in the gap risk of mini-futures
Mini-futures need to be priced and hedged taking sudden jumps into account
Looking beyond SA-CCR
An alternative calculation of exposure at default that handles complex portfolios is presented
Vega decomposition for the LV model: an adjoint differentiation approach
Introducing an algorithm for computing vega sensitivities at all strikes and expiries
Alternatives to deep neural networks in finance
Two methods to approximate complex functions in an explainable way are presented
Interpolating commodity futures prices with Kriging
A futures price’s term structure is built to account for trends and seasonality effects
Deep calibration of rough volatility models
Rough vol models are calibrated and fitted to SPX and Vix smiles
Automatic implicit function theorem
New technique can improve use of adjoint algorithmic differentiation in calibration problems
Data-driven wrong-way risk
A calculation method for regulatory CVA wrong-way risk based on credit and exposure is introduced