We develop a systematic approach to Markovian projection onto an effective displaced diffusion, and work out a set of computationally efficient formulas valid for a large class of non-Markovian underlying processes. The generic derivation is followed by applications, including the calculation of...

We develop a technique of parameter averaging and Markovian projection on a quadratic volatility model based on a term-by-term matching of the asymptotic expansions of option prices in volatilities. In doing so, we revisit the procedure of asymptotic expansion and show that the use of the...

We develop a systematic approach to Markovian projection onto an effective displaced diffusion, and work out a set of computationally efficient formulas valid for a large class of non-Markovian underlying processes. The generic derivation is followed by applications, including the calculation of...

We revisit the cross-currency LIBOR Market Model armed with the technique of Markovian projection. We derive an efficient approximation for FX options and show how the FX skew can be modeled consistently with the interest rate skew in a common multifactor model

Artificial Neural Networks (ANNs) have recently been proposed as accurate and fast approximators in various derivatives pricing applications. ANNs typically excel in fitting functions they approximate at the input parameters they are trained on, and often are quite good in interpolating between...

Credit Support Annexes (CSAs) that allow multiple currencies as collateral give rise to a collateral choice option in discounting. Numerical efficiency for valuing this optionality is key and first-order approximations have been proposed previously. In this paper, for the case of two currencies,...

We develop two neo-classical methods for function approximations, the generalized stochastic sampling (gSS) and the functional tensor train (fTT) methods, that are high-performing alternatives to generic deep neural networks (DNNs) currently routinely proposed for function approximations in...

In this article, we present the analytical approximation of zero-coupon bonds and swaption prices for general short rate models. The approximation is based on regular and singular expansions with respect to the small volatility and contains a low-dimensional integration. The model in hand...

We develop the algorithmic approach for Counterparty exposure calculation and automate its application to arbitrary complicated instruments. Assuming that the portfolio is priced by the backward (American) Monte-Carlo method, our approach allows calculating the credit exposure as a pricing...