This work presents an efficient computational framework for pricing a general class of exotic and vanilla options under a versatile stochastic volatility model.
Can a centenarian maths idea speed up the calculation of forward sensitivities?
Calibration of local-stochastic and path-dependent volatility models to vanilla and no-touch options
In this paper, the authors consider a large class of continuous semi-martingale models and propose a generic framework for their simultaneous calibration to vanilla and no-touch options.
Penalty methods for bilateral XVA pricing in European and American contingent claims by a partial differential equation model
Under some assumptions, the valuation of financial derivatives, including a value adjustment to account for default risk (the so-called XVA), gives rise to a nonlinear partial differential equation (PDE). The authors propose numerical methods for…
In this paper, the authors discuss how tree-based machine learning techniques can be used in the context of derivatives pricing.
The authors devise a neural network-based compression/completion methodology for financial nowcasting.
In this paper, the authors discuss all aspects of derivative pricing under the Heston–CLV model: calibration with an efficient Fourier method; a Monte Carlo simulation with second-order convergence; and accurate partial differential equation pricing…
In this paper, the authors introduce two mixing fractions that can be controlled separately to apply impact to the volatility-of-volatility and the correlation in a lognormal LSV model.
The authors consider the problem of finding a valid covariance matrix in the foreign exchange market given an initial nonpositively semidefinite (non-PSD) estimate of such a matrix.
This work generalizes existing one- and two-dimensional pricing formulas with an equal number of barriers to a setting of n dimensions and up to two barriers in the presence of stochastic volatility.
Pricing path-dependent Bermudan options using Wiener chaos expansion: an embarrassingly parallel approach
In this work, the authors propose a new policy iteration algorithm for pricing Bermudan options when the payoff process cannot be written as a function of a lifted Markov process.
This paper provides an efficient and accurate hybrid method to price American standard options in certain jump-diffusion models and American barrier-type options under the Black–Scholes framework.
Universities fret over drop in international students and demands of online learning
This paper provides a comprehensive review of the field of neural networks, comparing articles in terms of input features, output variables, benchmark models, performance measures, data partition methods and underlying assets. Related work and…
The author considers a classical term structure model framework, ie, a Heath–Jarrow–Morton framework, on a time-discrete tenor, such as the London Interbank Offered Rate market model, using a sequence of tenor discretizations, where the tenors are valid…
Gaussian process regression for derivative portfolio modeling and application to credit valuation adjustment computations
The authors present a multi-Gaussian process regression approach, which is well suited for the over-the-counter derivative portfolio valuation involved in credit valuation adjustment (CVA) computation.
In the present paper, a decomposition formula for the call price due to Alòs is transformed into a Taylor-type formula containing an infinite series with stochastic terms. The new decomposition may be considered as an alternative to the decomposition of…
Unis are adding machine learning and data science courses, but need instructors to teach them
In this paper, we refer to the axiomatic theory of risk and investigate the problem of formal verification of the expected shortfall (ES) model based on a sample ES. Recognizing the infeasibility of parametric methods, they explore the bootstrap…
In this paper, a novel quasi-multiperiod model for optimal position liquidation in the presence of both temporary and permanent market impact is proposed. Two main features distinguish the proposed approach from its alternatives.
In this paper, the authors investigate a nonlinear generalization of the Black–Scholes equation for pricing American-style call options, where the volatility term may depend on both the underlying asset price and the Gamma of the option.
In this paper, the author uses the mean–variance hedging criterion to value contracts in incomplete markets.
This paper derives an alternative fast Fourier transform-based computational approach for calculating the target capital of the SST that is more than 600 times faster than a Monte Carlo simulation.
In this paper, the authors propose and investigate a new method for the calibration to American option price data.