We analyse the pricing of derivatives under a CSA agreement, without considering netting, minimum transfer amounts and thresholds. We come up with a decomposition of the total contract's value in a risk-free component, a liquidity value adjustment and a funding value adjustment. Implications for...

We propose a non-equidistant Q rate matrix setting formula such that a well-defined continuous time Markov chain can lead to excellent approximations to jump-diffusions with affine or non-affine functional specifications. This approach also accommodates state-dependent jump intensity and jump...

Quasi Monte Carlo (QMC) and Global Sensitivity Analysis (GSA) techniques are applied for pricing and hedging representative financial instruments of increasing complexity. We compare standard Monte Carlo (MC) vs QMC results using Sobol' low discrepancy sequences, different sampling strategies,...

We examine the pricing of financial crash insurance during the 2007-2009 financial crisis in U.S. option markets, and we show that a large amount of aggregate tail risk is missing from the cost of financial sector crash insurance during the crisis. The difference in costs between...

We examine the pricing of financial crash insurance during the 2007-2009 financial crisis in U.S. option markets, and we show that a large amount of aggregate tail risk is missing from the cost of financial sector crash insurance during the crisis. The difference in costs between...

In this paper we present two (semi)-analytic synthetic CDO tranche pricing formulas using a subordinator Levy Marshall-Olkin credit correlation model. These formulas can be easily evaluated in terms of machine computational time, therefore they are particularly suitable for the correlation model...

R&D is often a highly uncertain venture where experiments achieve successful outcomes on an extraordinarily rare basis. Just one successful product could change the future of a company; the discovery stage can often be an invaluable or disastrous experience. We develop a real R&D option model...

We present a Graphics Processing Unit (GPU) parallelization of the computation of the price of cross-currency interest rate derivatives via a Partial Differential Equation (PDE) approach. In particular, we focus on the GPU-based parallel computation of the price of long-dated foreign exchange...