66 citations · 77 across the 21 of their papers we have counts for
13 papers · 1 filter
Modeling and Replication of the Prepayment Option of Mortgages including Behavioral Uncertainty
Leonardo Perotti, Lech A. Grzelak, Cornelis W. Oosterlee
Prepayment risk embedded in fixed-rate mortgages forms a significant fraction of a financial institution's exposure, and it receives particular attention because of the magnitude o…
Basket Options with Volatility Skew: Calibrating a Local Volatility Model by Sample Rearrangement
Nicola F. Zaugg, Lech A. Grzelak
The pricing of derivatives tied to baskets of assets demands a sophisticated framework that aligns with the available market information to capture the intricate non-linear depende…
On the Hull-White model with volatility smile for Valuation Adjustments
T. van der Zwaard, L. A. Grzelak, C. W. Oosterlee
Affine Diffusion dynamics are frequently used for Valuation Adjustments (xVA) calculations due to their analytic tractability. However, these models cannot capture the market-impli…
Randomization of Short-Rate Models, Analytic Pricing and Flexibility in Controlling Implied Volatilities
Lech A. Grzelak
We focus on extending existing short-rate models, enabling control of the generated implied volatility while preserving analyticity. We achieve this goal by applying the Randomized…
On Pricing of Discrete Asian and Lookback Options under the Heston Model
Leonardo Perotti, Lech A. Grzelak
We propose a new, data-driven approach for efficient pricing of - fixed- and float-strike - discrete arithmetic Asian and Lookback options when the underlying process is driven by…
Efficient Wrong-Way Risk Modelling for Funding Valuation Adjustments
T. van der Zwaard, L. A. Grzelak, C. W. Oosterlee
Wrong-Way Risk (WWR) is an important component in Funding Valuation Adjustment (FVA) modelling. Yet, the standard assumption is independence between market risks and the counterpar…
On Randomization of Affine Diffusion Processes with Application to Pricing of Options on VIX and S&P 500
Lech A. Grzelak
The class of Affine (Jump) Diffusion (AD) has, due to its closed form characteristic function (ChF), gained tremendous popularity among practitioners and researchers. However, ther…
Efficient Pricing and Calibration of High-Dimensional Basket Options
Lech A. Grzelak, Juliusz Jablecki, Dariusz Gatarek
This paper studies equity basket options -- i.e., multi-dimensional derivatives whose payoffs depend on the value of a weighted sum of the underlying stocks -- and develops a new a…
Relevance of Wrong-Way Risk in Funding Valuation Adjustments
T. van der Zwaard, L. A. Grzelak, C. W. Oosterlee
In March 2020, the world was thrown into financial distress. This manifested itself in increased uncertainty in the financial markets. Many interest rates collapsed, and funding sp…
Fast Sampling from Time-Integrated Bridges using Deep Learning
Leonardo Perotti, Lech A. Grzelak
We propose a methodology to sample from time-integrated stochastic bridges, namely random variables defined as conditioned on and $Y(t_2…
Sparse Grid Method for Highly Efficient Computation of Exposures for xVA
Lech A. Grzelak
Every "x"-adjustment in the so-called xVA financial risk management framework relies on the computation of exposures. Considering thousands of Monte Carlo paths and tens of simulat…
A Computational Approach to Hedging Credit Valuation Adjustment in a Jump-Diffusion Setting
T. van der Zwaard, L. A. Grzelak, C. W. Oosterlee
This study contributes to understanding Valuation Adjustments (xVA) by focussing on the dynamic hedging of Credit Valuation Adjustment (CVA), corresponding Profit & Loss (P&L) and…
A neural network-based framework for financial model calibration
Shuaiqiang Liu, Anastasia Borovykh, Lech A. Grzelak +1
A data-driven approach called CaNN (Calibration Neural Network) is proposed to calibrate financial asset price models using an Artificial Neural Network (ANN). Determining optimal…