Constant Proportion Debt Obligations (CPDOs) are structured credit derivatives that generate high coupon payments by dynamically leveraging a position in an underlying portfolio of investment-grade index default swaps. CPDO coupons and principal notes received high initial credit ratings from...

We propose a stable non-parametric algorithm for the calibration of pricing models for portfolio credit derivatives: given a set of observations of market spreads for CDO tranches, we construct a risk-neutral default intensity process for the portfolio underlying the CDO which matches these...

We propose and study a simple stochastic model for the dynamics of a limit order book, in which arrivals of market order, limit orders and order cancellations are described in terms of a Markovian queueing system. Through its analytical tractability, the model allows to obtain analytical...

We study the price impact of order book events--limit orders, market orders, and cancellations--using the NYSE Trades and Quotes data for fifty U.S. stocks. We show that, over short time intervals, price changes are mainly driven by the order flow imbalance (OFI), defined as the imbalance...

type="main" xml:lang="en" <p>We propose a market–based approach to the modelling of implied volatility, in which the implied volatility surface is directly used as the state variable to describe the joint evolution of market prices of options and their underlying asset. We model the evolution of...</p>

A crucial ingredient in social interaction models is the structure of peer groups, which link individuals with similar characteristics. We propose and study a dynamic binary choice model with social interactions in which heterogeneity of peer group effects is modeled introducing diversity in...

We compare the performance of various hedging strategies for index collateralized debt obligation (CDO) tranches across a variety of models and hedging methods during the recent credit crisis. Our empirical analysis shows evidence for market incompleteness: a large proportion of risk in the CDO...

We study the price impact of order book events - limit orders, market orders and cancelations - using the NYSE TAQ data for 50 U.S. stocks. We show that, over short time intervals, price changes are mainly driven by the order flow imbalance, defined as the imbalance between supply and demand at...

We introduce a reduced basis method for the efficient numerical solution of partial integro-differential equations which arise in option pricing theory. Our method uses a basis of functions constructed from a sequence of Black-Scholes solutions with different volatilities. We show that this...

We propose and study a simple stochastic model for the dynamics of a limit order book, in which arrivals of market order, limit orders and order cancellations are described in terms of a Markovian queueing system. Through its analytical tractability, the model allows to obtain analytical...