Banking
Solving final value problems with deep learning
Pricing vanilla and exotic options with a deep learning approach for PDEs
Deep asymptotics
Introducing a new technique to control the behaviour of neural networks
Multi-curve Cheyette-style models with lower bounds on tenor basis spreads
A solution for a no-arbitrage condition in Cheyette-style models is proposed
Semi-closed-form prices of barrier options in the Hull-White model
New pricer for options with time-dependent barrier shown to be computationally efficient and stable
A guiding light for corporates lost in the fog of XVAs
Chris Kenyon proposes a framework for optimising XVAs – from the client perspective
Client engineering of XVA
A client’s guide to reducing XVA in times of need
Podcast: Matthias Arnsdorf on a new – and cheaper – KVA
Quant proposes approach anchored by a dealer’s default rate rather than its return on equity
KVA as a transfer of wealth
A capital valuation adjustment designed to preserve a firm’s value to shareholders is introduced
Finite difference schemes with exact recovery of vanilla option prices
A model unifies the classic local vol and binomial trees to accurately price options
Machine learning hedge strategy with deep Gaussian process regression
An optimal hedging strategy for options in discrete time using a reinforcement learning technique
Finding the corporate credit cycle for IFRS 9
Decomposing corporate default rates helps identify credit cycles
Danske quants discover speedier way to crunch XVAs
Differential machine learning produces results “thousands of times faster and with similar accuracy”
Differential machine learning: the shape of things to come
A derivative pricing approximation method using neural networks and AAD speeds up calculations
CCP discounting big bang: convexity adjustment
The collateral transition to SOFR will create convexity adjustments that need to be modelled
Benchmark reform goes non-linear
Terminating Libor will bring great challenges to the pricing of non-linear rate products
The data anonymiser
Non-parametric approaches anonymise datasets while reproducing their statistical properties
The unintended impact of collateral on financial stability
Initial margin requirements for OTC derivatives can increase risk of contagion, writes economist
A new arbitrage-free parametric volatility surface
A new arbitrage-free volatility surface with closed-form valuation and local volatility is introduced
Libor replacement II: completing the generalised FMM
The FMM is upgraded to model the full term structure, pricing all possible bonds and the bank account
Mind the tax when hedging TRS
New model gauges whether deals are still profitable, after taxes
Funding adjustments in equity linear products
How tax asymmetries and Tobin tax affect the pricing of total return swaps
A tale of two (or three, or four) models
Performance measure based on quality of replicating portfolios outperforms ‘P&L explain’, new paper claims
Quantifying model performance
Quality of replicating portfolio is used to measure performance of a model
Two-factor Black-Karasinski pricing kernel
Analytic formulas for bond prices and forward rates are derived by expanding existing rate models