Risk-Neutral Market Simulation
We develop a risk-neutral spot and equity option market simulator for a single underlying, under which the joint market process is a martingale. We leverage an efficient low-dimensional representation of the market which preserves no static arbitrage, and employ neural spline flows to simulate samples which are free from conditional drifts and are highly realistic in the sense that among all possible risk-neutral simulators, the obtained risk-neutral simulator is the closest to the historical data with respect to the Kullback-Leibler divergence. Numerical experiments demonstrate the effectiveness and highlight both drift removal and fidelity of the calibrated simulator.
Code (0)
등록된 구현이 없습니다.
Similar Papers 제목 키워드 기반
From bid-ask credit default swap quotes to risk-neutral default probabilities using distorted expectations
Risk-neutral default probabilities can be implied from credit default swap (CDS) market quotes. In practice, mid CDS quotes are used as inputs, as their risk-neutral counterparts are not observable. We show how to imply …
A multi-factor market-neutral investment strategy for New York Stock Exchange equities
This report presents a systematic market-neutral, multi-factor investment strategy for New York Stock Exchange equities with the objective of delivering steady returns while minimizing correlation with the market. A robu…
feature selectionMarket Scoring Rules Act As Opinion Pools For Risk-Averse Agents
A market scoring rule (MSR) – a popular tool for designing algorithmic prediction markets – is an incentive-compatible mechanism for the aggregation of probabilistic beliefs from myopic risk-neutral agents. In this paper…
scoring ruleDeep Hedging: Learning Risk-Neutral Implied Volatility Dynamics
We present a numerically efficient approach for learning a risk-neutral measure for paths of simulated spot and option prices up to a finite horizon under convex transaction costs and convex trading constraints. This app…
Alternatives to classical option pricing
We develop two alternate approaches to arbitrage-free, market-complete, option pricing. The first approach requires no riskless asset. We develop the general framework for this approach and illustrate it with two specifi…