With the rapid development of the credit derivatives market, efficient pricing of default has become an extremely important issue for the credit risk management of banks and other investors. We consider here some of the opportunities and problems that the development of this market poses to...

In order to evolve beyond bitcoins, which are still speculative, volatile and small in terms of market cap, cryptocurrencies need decentralized financial intermediaries. In this work we first show that one fundamental role they can take regards price stability. The Economist and the Center for...

We show that when a derivative portfolio has different correlated underlyings, hedging using classical greeks (first-order derivatives) is not the best possible choice. We first show how to adjust greeks to take correlation into account and reduce P&L volatility. Then we embed...

This work focuses on the swaptions automatic cascade calibration algorithm (CCA) for the LIBOR Market Model (LMM) first appeared in Brigo and Mercurio (2001). This method induces a direct analytical correspondence between market swaption volatilities and LMM parameters, and allows for a perfect...

The behaviour of a smile model when applied to hedging should be consistent with market evidence that asset prices and market smiles move in the same direction (Hagan et al. 2002). Local volatility models are criticized because not consistent with this desired behaviour, and this has been an...