We consider the valuation and risk management of derivatives on defaultable assets such as bonds taking into account funding (FVA), cash collateral, underlying default, counterparty default (CVA) and default correlation using joint default poisson process. The framework can be considered as an...

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...

Computational parsimony makes reduced factor LIBOR market models popular among practitioners. However, value functions and sensitivities of such models are described by degenerate parabolic (i.e. semi-elliptic) equations where the existence of regular global solutions is not trivial. In this...

We consider arbitrage-free interpolation of arbitrage-free input data of European option prices. The method derived is independent of the underlying (equity, rates, FX, etc.). A particular contribution of the paper is that for the chosen coordinate system and a wide variety of interpolation...

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...

After the recent financial crisis (also known as the "Credit Crunch'') it was observed that some market data exhibited non-zero probability for negative forward rates. In particular, options with zero strikes were quoted with non-zero prices. This led to the requirement to model and interpret...