The binomial model presents a set of properties that make it a suitable approach in order to value the real options, throughout an easy and practical application. This is possible by the adaptation of the valuation principle for non-arbitrage, own of the options pricing theory. However, their...

American and Bermudan-type financial instruments are often priced with specific Monte Carlo techniques whose efficiency critically depends on the effective dimensionality of the problem and the available computational power. In our work we focus on Bermudan Swaptions, well-known interest rate...

Although deep learning has received attention in many fields, application in economics is rare. Recently, Azinovic et al. (2019) applied deep learning to solve dynamic overlapping generations models and demonstrated that deep learning is a powerful tool for use in the field of economics....

Deep learning is a powerful tool whose applications in quantitative finance are growing every day. Yet, artificial neural networks behave as black boxes and this hinders validation and accountability processes. Being able to interpret the inner functioning and the input-output relationship of...

We introduce a data driven and model free approach for computing conditional expectations. The new method is based on classical techniques combined with machine learning methods. In particular, we consider kernel density estimation based on simulated risk factors combined with a control variate....

This paper studies the effects of social learning on the transmission of COVID-19 in a network model. We calibrate our model to detailed data for Cape Town, South Africa and show that the inclusion of social learning improves the prediction of excess fatalities, reducing the best-fit squared...

FRTB proposes Indirect Approach (IA) to address data challenges during period of stress for calculating stress Expected Shortfall (ES) under Internal Model Method (IMM). Unlike other topics like Non-Modellable Risk Factors (NMRF) and Profit and Loss Attribution Test (PLAT), Indirect Approach...

We examine the performance of the Black-Scholes (B-S) formulas around (i.e., before, during and after) two periods of market stress: the subprime crisis (October, 2018) and the onset of the COVID-19 pandemic (March, 2020). We find, in agreement with previous studies under different...

In this paper we prove that the price of a defaultable bond, under a Vasicek short rate dynamic coupled with a Cox-Ingersoll-Ross default intensity model, is a real analytic function, in a neighborhood of the origin, of the correlation parameter between the Brownian motions driving the...

This study investigates which values of an employee-friendly (EF) corporate culture are the most important predictors of firm value and operating performance using a novel social media dataset of approximately 250,000 crowdsourced employee reviews of 18 different characteristics of a firm’s...