Brownian motion
Backtesting correlated quantities
A technique to decorrelate samples and reach higher discriminatory power is presented
A new fast local volatility model
A local volatility model based on the Bass construction and alternative to Dupire-style models is introduced
Liquidity stress-testing using optimal portfolio liquidation
A methodology to derive liquidation costs and times in OTC markets is proposed
Rainbows and transforms: semi-analytic formulas
In this paper the authors show how the techniques introduced by Hurd and Zhou in 2010 can be used to derive a pricing framework for rainbow options by using the joint characteristic function of the logarithm of the underlying assets.
A fractional Brownian–Hawkes model for the Italian electricity spot market: estimation and forecasting
This paper proposes a new model for the description and forecast of gross prices of electricity in the liberalized Italian energy market via an additive two-factor model.
A step closer to the perfect volatility model
Research on ‘rough volatility’ gives fresh insight into financial fluctuations, quant expert explains
ADOL: Markovian approximation of a rough lognormal model
A variation of the rough volatility model is introduced by plugging in a different stochastic process
The Garch linear SDE: explicit formulas and the pricing of a quanto CDS
A new closed-form approximation is applied to quanto CDS pricing
Equity market impact modeling: an empirical analysis for the Chinese market
This paper discusses and derives the extremum of the expectation of permanent impact and realized impact by constructing several special trading trajectories in the Chinese market.
Emerging market corporate bonds as first-to-default baskets
Modified Merton model offers insights on EM corporate debt
Importance sampling applied to Greeks for jump–diffusion models with stochastic volatility
In this paper, the authors develop a procedure to reduce the variance when numerically computing the Greeks obtained via Malliavin calculus for jump–diffusion models with stochastic volatility.
Pricing multivariate barrier reverse convertibles with factor-based subordinators
In this paper, the authors study factor-based subordinated Lévy processes in their variance gamma (VG) and normal inverse Gaussian (NIG) specifications, and focus on their ability to price multivariate exotic derivatives.
Lessons from the Mortician: volatility modulation
Paul Tudor Jones II, Santhanam Nagarajan and Dario Villani show how to use volatility modulation
Model-free valuation of barrier options
Austing and Li provide a continuous barrier options pricing formula that fits the volatility smile
Analysing common processes used to model energy prices
An introduction to energy spot price processes