This paper investigates the fair share of GDP required to mitigate climate change costs, using an extended DICE model. A dedicated fund, supplied annually by a fixed fraction of GDP, is introduced to cover abatement and damage costs. Numerical analysis reveals that a funding rate of 2.4% of GDP...

We consider a classical discrete term-structure model for the joint modelling of risk-free and defaultable bonds (also known under its historical name, defaultable LIBOR market model). We model the risk-free forward rate Lᵢ and the defaultable forward-rate Lᵈᵢ.In the usual specification...

In this short note, we show that a happens-before relationship may be destroyed when applying various standard methods to adjust data for a duration. An application is the calculation of the time of infection from the time of symptom onset by adjusting with the incubation time period.We first...

In this short note we develop a model for discounting.A focus of the model is the discounting, when discount factors cannot be derived from market products. That is, a risk-neutralizing trading strategy cannot be performed.This is the case, when one is in need of a risk-free (default-free)...

We consider 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 for a specific simulation time interval. At...

In this note we describe the application of existing smart contract technologies with the aim to construct a new digital representation of a financial derivative contract. We compare several existing DLT based technologies. We provide a detailed description of two separate prototypes which are...

In this paper, we present a method for the accurate estimation of the derivative (aka. sensitivity) of expectations of functions involving an indicator function by combining a stochastic algorithmic differentiation and a regression.The method is an improvement of the approach presented in [Risk...

In this note we describe a smart derivative contract with a fully deterministic termination to remove many of the inefficiencies in collateralized OTC transactions. The automatic termination procedure embedded in the smart contracts replaces the counterparty default by an option right of the...

In this paper we propose a derivative valuation framework based on Lévy processes which takes into account the possibility that the underlying asset is subject to information-related trading halts/suspensions. Since such assets are not traded at all times, we argue that the natural underlying...

We use a supervised deep convolution neural network to replicate the calibration of the Heston model to equity volatility surfaces. For this purpose we treat the implied volatility surface together with some auxiliary data, namely the strikes and moneyness of the corresponding options and the...