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Convertible instruments are contracts, used in venture financing, which give investors the right to receive shares in the venture in certain circumstances. In liquidity events, investors may have the option to either receive back their principal investment, or to receive a proportional payment after conversion of the contract to a shareholding. In each case, the value of the payment may depend on the choices made by …
This paper investigates the callable convertible bond problem in the presence of a liquidity constraint modelled by Poisson signals. We assume that neither the bondholder nor the firm has absolute priority when they stop the game simultaneously, but instead, a proportion $m\in[0,1]$ of the bond is converted to the firm's stock and the rest is called by the firm. The paper thus generalizes the special case studied in …
We develop a pricing model for Sovereign Contingent Convertible bonds (S-CoCo) with payment standstills triggered by a sovereign's Credit Default Swap (CDS) spread. We model CDS spread regime switching, which is prevalent during crises, as a hidden Markov process, coupled with a mean-reverting stochastic process of spread levels under fixed regimes, in order to obtain S-CoCo prices through simulation. The paper uses …
We propose a novel valuation framework for contingent convertible (CoCo) bonds based on the issuing bank's Common Equity Tier 1 (CET1) ratio, which is widely acknowledged as an indicator of a bank's solvency. Our approach develops a bivariate jump-diffusion model that captures the dynamic relationship linking the CET1 ratios, share prices, and CoCo bond prices, incorporating both continuous market movements and corre…
This paper investigates whether a financial system can be made more stable if financial institutions share risk by exchanging contingent convertible (CoCo) debt obligations. The question is framed in a financial network model of debt and equity interlinkages with the addition of a variant of the CoCo that converts continuously when a bank's equity-debt ratio drops to a trigger level. The main theoretical result is a …
In the present paper we fill an essential gap in the Convertible Bonds pricing world by deriving a Binary Tree based model for valuation subject to credit risk. This model belongs to the framework known as Equity to Credit Risk. We show that this model converges in continuous time to the model developed by Ayache, Forsyth and Vetzal [2003]. To this end, both forms of credit risk modeling, the so-called reduced (const…
Prediction markets have gained adoption as on-chain mechanisms for aggregating information, with platforms such as Polymarket demonstrating demand for stablecoin-denominated markets. However, denominating in non-interest-bearing stablecoins introduces inefficiencies: participants face opportunity costs relative to the fiat risk-free rate, and Bitcoin holders in particular lose exposure to BTC appreciation when conver…
This book, which is in Spanish, provides detailed descriptions, including over 550 mathematical formulas, for over 150 trading strategies across a host of asset classes (and trading styles). This includes stocks, options, fixed income, futures, ETFs, indexes, commodities, foreign exchange, convertibles, structured assets, volatility (as an asset class), real estate, distressed assets, cash, cryptocurrencies, miscella…
Commodity futures can be represented hierarchically, with underlying assets at the upper level and individual futures contracts at the lower level. Entities at each level can be connected by edges reflecting inherent correlations, with cross-level edges capturing contract-to-underlying asset connections. Building on our observations of these structures, we propose a hierarchical graph learning approach for calendar s…
Managing drawdown, the peak-to-trough decline in an investment portfolio's value, is a precondition for long-term survival in practical investment management. However, mainstream stock forecasting methods predominantly optimize returns or Sharpe ratios under the independent and identically distributed (i.i.d.) assumption. Real markets do not follow this assumption, triggering catastrophic drawdowns. We propose a cros…
We present the unified market-based description of returns and variances of the trades with shares of a particular security, of the trades with shares of all securities in the market, and of the trades with the market portfolio. We consider the investor who doesn't trade the shares of his portfolio he collected at time t0 in the past. The investor observes the time series of the current trades with all securities mad…
Portfolio optimisation is essential in quantitative investing, but its implementation faces several practical difficulties. One particular challenge is converting optimal portfolio weights into real-life trades in the presence of realistic features, such as transaction costs and integral lots. This is especially important in automated trading, where the entire process happens without human intervention. Several works…
Decentralized exchanges record trading and liquidity provision on public blockchains, but empirical analysis requires interpreting these records and linking them to execution metadata. dexamine is a Python package that parses Uniswap v2 and v3 events on Ethereum. It converts transaction receipt logs into observations of trades and liquidity changes, with token quantities, pool state, transaction order, and gas inform…
Partially convertible economies face a market-design problem: trade integration, cross-border investment, and domestic balance-sheet exposure increase the demand for currency hedging before full financial integration is complete. China adopted a distinctive architecture for this problem by fostering a deliverable offshore Renminbi market (CNH) alongside the segmented onshore market (CNY), rather than relying only on …
Generating realistic synthetic option prices requires implied volatility as an input, yet implied volatility is itself derived from observed option prices, creating a circular dependency that limits synthetic data for machine-learning and risk-analysis applications. We break this circularity with a pipeline in which implied volatility emerges as an output of a structural model of equity returns. A Jump Hidden Markov …
This study identifies and quantifies a significant informational friction embedded in the SEC Form 144 disclosure regime, characterized as predictive decoupling. Drawing on a theoretical foundation of welfare economics, the article argues that the current reporting inversion -- where trade execution (Form 4) frequently precedes the public notice of intent (Form 144) -- violates the conditions for Pareto efficiency by…
Stablecoins have emerged as a significant component of global financial infrastructure, with aggregate market capitalization surpassing USD250 billion in 2025. Their increasing integration into payment and settlement systems has simultaneously introduced novel channels of systemic exposure, particularly liquidity risk during periods of market stress. This study develops a hybrid monetary architecture that embeds fiat…
Stablecoins promise par convertibility, yet issuers must balance immediate liquidity against yield on reserves to keep the peg credible. We study this treasury problem as a continuous-time control task with two instruments: reallocating reserves between cash and short-duration government bills, and setting a spread fee for either minting or burning the coin. Mint and redemption flows follow mutually exciting processe…
A convertible is a bond plus an embedded call on the issuer’s stock — credit with equity convexity, or equity with a coupon, depending on the delta.
Diluted shares are the share count as if in-the-money options, convertibles, and other claims were exercised — the honest denominator for EPS and value.
Argentina’s 2001–02 collapse ended the convertibility 1:1 peg with default, corralito, and a violent real devaluation — a political-economy crisis of an overvalued peg.
Long the convertible and short the delta in the stock — harvest cheap implied vol / credit, with funding and squeeze risk.
Argentina’s 2001–02 collapse ended the convertibility 1:1 peg with default, corralito, and a violent real devaluation — a political-economy crisis of an overvalued peg.
Long the convertible and short the delta in the stock — harvest cheap implied vol / credit, with funding and squeeze risk.
A convertible is a bond plus an embedded call on the issuer’s stock — credit with equity convexity, or equity with a coupon, depending on the delta.
Diluted shares are the share count as if in-the-money options, convertibles, and other claims were exercised — the honest denominator for EPS and value.