This study develops a linear-rational multi-curve term structure model based on the Wishart affine process. The model allows for a stochastic correlation between the curves whilst the pricing of swaptions remains at part in terms of numerical complexity with caps and floors. We also show how the...

This paper studies, both theoretically and empirically, the optimal executive compensation when firm performance is a noisy signal of executive’s hidden effort and the volatility of firm performance is stochastic. We build a tractable dynamic principal-agent model and show analytically that...

We study saddlepoint approximations to the tail-distribution for different credit portfolio losses in continuous time intensity based models which stochastic recoveries, under conditional independent homogeneous settings. In such models, conditional on the filtration generated by the individual...

Volatility Skew and Smile of Interest Rate products (Swaption and Caplet) are represented by SABR (Stochastic Alpha Beta Rho model). So, the Interest Rate derivatives model for pricing the callable exotic swaps should be comparable to the SABR volatility surface. In the interest rate derivatives...

In view of their tractability, Hawkes processes are widely employed in high-frequency data. However, even in the absence of kernel (i.e. Poisson case), it is well-documented empirically that the baseline is not constant, reproducing in particular seasonalities from the financial market. In this...

We extend the discrete-time construction of [Guyon, J.: The Joint S&P 500/VIX Smile Calibration Puzzle Solved, Risk, April 2020] and explain how to build a continuous-time stochastic volatility (SV) model which jointly and exactly calibrates S&P 500 (SPX) smiles, VIX futures, and VIX smiles at...

We study graphon mean-field backward stochastic differential equations (BSDEs) with jumps and associated dynamic risk measures. We establish the existence, uniqueness and measurability of solutions under some regularity assumptions. For an interacting mean-field particle system with...

We show how traders use marketable limit orders (MLOs) to liquidate a position over a trading window when there is latency in the marketplace. MLOs are liquidity taking orders that specify a price limit and are for immediate execution only; however, if the price limit of the MLO precludes it...

This paper presents the binomial expansion and series with optimized binomial coefficients. The binomial series is built on the building blocks of optimized binomial coefficients and multiple summations of geometric series

This paper applies two statistical arbitrage algorithms on the U.S. equities market, using daily historical prices from January 2005 to March 2012. The algorithms construct portfolios using two different frameworks, namely, the Vasicek model and co-integration approach, with a Markov...