Technical paper/Pricing
Floating exercise boundaries for American options in time-inhomogeneous models
A pricing model is extended to account for negative interest rates or convenience yields
Pricing time-capped American options using a least squares Monte Carlo method
This paper uses a modified least squares Monte Carlo method to price time-capped American options.
Pricing American options under irrational behavior in a Markov regime-switching model with a finite-element method
The authors investigate the problem of pricing American options under an irrational strategy, putting forward a method to negate this problem and demonstrate the performance of this model against alternatives.
Deep equal risk pricing of illiquid derivatives with multiple hedging instruments
The authors propose the using equal risk pricing for market-consistent valuation of illiquid financial derivatives, transferring information in liquid hedging strategy prices into the price of the illiquid derivative.
A hard exit threshold strategy for market-makers
A closed-form solution to derive optimal stop-loss and profit-taking levels is presented
Pricing share buy-backs: an alternative to optimal control
A new method applies optimised heuristic strategies to maximise share buy-back contracts’ value
Joint S&P 500/VIX smile calibration in discrete and continuous time
An arbitrage-free model for exotic options that captures smiles and futures is presented
The cost of mis-specifying price impact
Expected returns can be significantly affected by the wrong use of impact models
Hedging of financial derivative contracts via Monte Carlo tree search
This paper applies the Monte Carlo tree search as a method for replication in the presence of risk and market friction
Analytic risk-free rates option pricing with smile and skew
An arbitrage-free short-rate model for backward-looking compounded rates 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
Interpolating commodity futures prices with Kriging
A futures price’s term structure is built to account for trends and seasonality effects
Market-making by a foreign exchange dealer
An optimal liquidity model for pricing and hedging decisions is presented
Repo haircuts and economic capital: a theory of repo pricing
The author proposes a repo haircut model that will identify capital for repo default risk as the main driver of repo spreads and allow investors to settle at an optimal combination of the haircut and repo rate.
The contractual dividend bleed
Models for dividend protected options need to compensate for valuation mismatches
Linking performance of vanilla options to the volatility premium
A framework to account for vanilla options' performance in trading strategies is presented
Swap rate: cash-settled swaptions in the fallback
A fallback pricing method that reduces vanilla swaptions’ complexity is introduced
Semi-analytic conditional expectations
A data-driven approach to computing expectations for the pricing and hedging of exotics
Is factor momentum greater than stock momentum?
Is factor momentum greater than stock momentum? Yes – this paper argues – but only at short lags.
Sec-lending haircuts and indemnification pricing
A pricing method for borrowed securities that includes haircut and indemnification is introduced