arXiv · arXiv q-fin · 2014
We develop a new Monte Carlo variance reduction method to estimate the expectation of two commonly encountered path-dependent functionals: first-passage times and occupation times of sets. The method is based on a recursive approximation of the first-passage time probability and expected occupation time of sets of a Levy bridge process that relies in part on a randomisation of the time parameter. We establish this re…
Aleksandar Mijatovic, Martijn Pistorius, Johannes Stolte
arXiv · arXiv q-fin · 2026
Concentrated liquidity provision in decentralized exchanges presents a fundamental Impulse Control problem. Liquidity Providers (LPs) face a non-trivial trade-off between maximizing fee accrual through tight price-range concentration and minimizing the friction costs of rebalancing, including gas fees and swap slippage. Existing methods typically employ heuristic or threshold strategies that fail to account for marke…
Pranay Anchuri
arXiv · arXiv q-fin · 2025
We use three stochastic models to evaluate the effectiveness of a number of possible pension designs which have been proposed for use in the UK. We consider individual DC schemes followed by full annuitisation and a flex-and-fix strategy which combines drawdown with gradual annuitisation. We compare these approaches with collective designs including: a flat-accrual shared-indexation CDC scheme that is similar to the …
John Armstrong, James Dalby, Rohan Hobbs
arXiv · arXiv q-fin · 2024
We evaluate the performance and level of intergenerational cross-subsidy in flat-accrual and dynamic-accrual collective defined contribution (CDC) schemes which have been designed to be compatible with UK legislation. In the flat-accrual scheme, all members accrue the benefits at the same rate irrespective of age. This captures the most significant feature of the Royal Mail Collective Pension Plan, which is currently…
John Armstrong, James Dalby, Catherine Donnelly
arXiv · arXiv q-fin · 2023
The dynamic hedging theory only makes sense in the setup of one given model, whereas the practice of dynamic hedging is just the opposite, with models fleeing after the data through daily recalibration. This is quite of a quantitative finance paradox. In this paper we revisit Burnett (2021) \& Burnett and Williams (2021)'s notion of hedging valuation adjustment (HVA), originally intended to deal with dynamic hedging …
Cyril Bénézet, Stéphane Crépey, Dounia Essaket
arXiv · arXiv q-fin · 2020
We give an upper bound on the resources required for valuable quantum advantage in pricing derivatives. To do so, we give the first complete resource estimates for useful quantum derivative pricing, using autocallable and Target Accrual Redemption Forward (TARF) derivatives as benchmark use cases. We uncover blocking challenges in known approaches and introduce a new method for quantum derivative pricing - the re-par…
Shouvanik Chakrabarti, Rajiv Krishnakumar, Guglielmo Mazzola, Nikitas Stamatopoulos, Stefan Woerner
arXiv · arXiv q-fin · 2016
This paper provides intuition on the relationship of accrual and mark-to-market valuation for cash and forward interest rate trades. Discounted cashflow valuation is compared to spread-based valuation for forward trades, which explains the trader's view on valuation. This is followed by Taylor series approximation for cash trades, uncovering simple intuition behind accrual valuation and mark-to-market adjustment. It …
Alexey Bakshaev
arXiv · arXiv q-fin · 2016
We develop a semi-analytic approach to the valuation of auto-callable structures with accrual features subject to barrier conditions. Our approach is based on recent studies of multi-assed binaries, present in the literature. We extend these studies to the case of time-dependent parameters. We compare numerically the semi-analytic approach and the day to day Monte Carlo approach and conclude that the semi-analytic ap…
V. G. Filev, P. Neykov, G. S. Vasilev
arXiv · arXiv q-fin · 2016
Income tax systems with pass-through entities transfer a firm's incomes to the shareholders, which are taxed individually. In 2014, a Chilean tax reform introduced this type of entity and changed to an accrual basis that distributes incomes (but not losses) to shareholders. A crucial step for the Chilean taxation authority is to compute the final income of each individual, given the complex network of corporations an…
Javiera Barrera, Eduardo Moreno, Sebastian Varas
arXiv · arXiv q-fin · 2016
Pricing options is an important problem in financial engineering. In many scenarios of practical interest, financial option prices associated to an underlying asset reduces to computing an expectation w.r.t.~a diffusion process. In general, these expectations cannot be calculated analytically, and one way to approximate these quantities is via the Monte Carlo method; Monte Carlo methods have been used to price option…
Deborshee Sen, Ajay Jasra, Yan Zhou