An adjustment for the volatility smile in Asian options is proposed
Some of the trickiest puzzles in finance could be solved by blending old and new technologies
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…
‘Rough volatility’ models promise better pricing and hedging of options. But will they catch on?
In the most realistic simulations, data-driven approach fared 30% worse than conventional hedging
The authors devise a neural network-based compression/completion methodology for financial nowcasting.
Technologist talks artificial intelligence, angel investing and accidentally contributing to the Basel framework
Research on ‘rough volatility’ gives fresh insight into financial fluctuations, quant expert explains
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.
Risk managers could use Black-Scholes to help drive strategy, writes René Doff
Overhauling pricing models could reap rewards even if prices don’t cross zero again
Performance measure based on quality of replicating portfolios outperforms ‘P&L explain’, new paper claims
Quality of replicating portfolio is used to measure performance of a model
Model tuned to negative prices has implications for pricing, margining and delta hedging
Bourse draws criticism over timing of options model change; delay in sending key margin file
New research addresses fundamental issues with ANN approximation of pricing models
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 authors propose a bivariate interpolation of the implied volatility surface based on Chebyshev polynomials. This yields a closed-form approximation of the implied volatility, which is easy to implement and to maintain.
In this paper, the authors analyse the convergence of tree methods for pricing barrier and lookback options.
Quants are embracing the idea of ‘model free’ pricing and hedging
BlackRock, MSCI, LFIS among firms looking to replace traditional, linear risk models
Quant says a new machine learning technique could change the way banks hedge derivatives
New models sidestep Black-Scholes and could slash hedging costs for some derivatives by up to 80%
In this paper, the authors construct a Heath-Platen-type Monte Carlo estimator that performs extraordinarily well compared with the crude Monte Carlo estimation.