Modelling joint dynamics of liquid vanilla options is crucial for arbitrage-free pricing of illiquid derivatives and managing risks of option trade books.
In this short paper, we study the simulation of a large system of stochastic processes subject to a common driving noise and fast mean-reverting stochastic volatilities.
Numerical Analysis Numerical Analysis Computational Finance
In addition, we show that removing arbitrage from prices data by our repair method can improve model calibration with enhanced robustness and reduced calibration error.
Recently, there has been a surge of interest in combining deep learning models with reasoning in order to handle more sophisticated learning tasks.
In this paper, we present a novel computational framework for portfolio-wide risk management problems, where the presence of a potentially large number of risk factors makes traditional numerical techniques ineffective.
This paper proposes a relaxed control regularization with general exploration rewards to design robust feedback controls for multi-dimensional continuous-time stochastic exit time problems.
In this work, we propose a class of numerical schemes for solving semilinear Hamilton-Jacobi-Bellman-Isaacs (HJBI) boundary value problems which arise naturally from exit time problems of diffusion processes with controlled drift.
In this paper, we establish that for a wide class of controlled stochastic differential equations (SDEs) with stiff coefficients, the value functions of corresponding zero-sum games can be represented by a deep artificial neural network (DNN), whose complexity grows at most polynomially in both the dimension of the state equation and the reciprocal of the required accuracy.
We propose a novel and generic calibration technique for four-factor foreign-exchange hybrid local-stochastic volatility models with stochastic short rates.
We consider a structural default model in an interconnected banking network as in Lipton [International Journal of Theoretical and Applied Finance, 19(6), 2016], with mutual obligations between each pair of banks.