Climate risk refers to the risks associated with climate change and has already started to impact various sectors of the economy. In this work, we focus on the impact of physical risk on the probability of default for a firm in the agribusiness sector. The probability of default is estimated...

We propose novel Bitcoin-denominated derivatives contracts on carbon bonds. We consider afutures contract on carbon bonds where its price is expressed in terms of bitcoins. We putforward an option on a future contract of the former type. Governments can use them to hedgeclimate change and...

Hedging at-the-money digital options near maturity, remains a challenge in quantitative finance. In the present work, we carry out a hedging strategy by means of a bull spread. We study the probability of super- and sub-hedge the digital option and minimize the probability of a sub-hedge...

In the present work, the European option pricing SWIFT method is extended for Heston model calibration. The computation of the option price gradient is simplified thanks to the knowledge of the characteristic function in closed form. The proposed calibration machinery appears to be extremely...

In this work, we propose a non-parametric density estimation technique for measuring the risk in a credit portfolio. The novel method is based on wavelets, and we derive closed-form expressions to calculate the Value-at-Risk (VaR), the Expected Shortfall (ES) as well as the risk contributions to...

This work presents an efficient computational framework for pricing a general class of exotic and vanilla options under a versatile stochastic volatility model. In particular, we propose the use of a finite state Continuous Time Markov Chain (CTMC) model which closely approximates the classic...

In this work we derive an exact formula to calculate the Expected Shortfall (ES) value for the one-factor delta-gamma approach which, to the best of our knowledge, was still missing in the literature. We then use the one-factor delta-gamma as a control variate to estimate the ES of the...

In this work, we propose an efficient and robust valuation of discretely monitored arithmetic Asian options based on Shannon wavelets. We employ the so-called SWIFT method, a Fourier inversion numerical technique with several important advantages with respect to the existing related methods....

In this paper, we present the data-driven COS method, ddCOS. It is a Fourier-based financial option valuation method which assumes the availability of asset data samples: a characteristic function of the underlying asset probability density function is not required. As such, the method...

We present a robust and highly efficient Shannon wavelet pricing method for plain-vanilla foreign exchange European options under the jump-extended Heston model with multi-factor CIR interest rate dynamics. Under a Monte Carlo and partial differential equation hybrid computational framework, the...