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The paper is concerned with the hedging of credit derivatives, in particular synthetic collateralized debt obligations (CDOs) tranches and first to default swap (FTD) with respect to actually traded credit default swaps index (CDS index). In the model, we will relax the name homogeneity assumption, that all the names share the same risk-neutral default. We think of two homogeneous groups of names...
Stochastic Point location (SPL) problem, in which a learning machine (LM) (entity, robot, algorithm, etc) tries to locate a certain point in an interval, belongs to the area of Machine Learning. During the process, LM is interactive with a stochastic environment so that the information available is probably wrong. In some conventional methods, the line is sampled into discrete points and the authors...
In order to solve the special type of reset option in the presence of transaction costs, we adopt the Markov chain method as well as the dual analysis. By introducing mixed stopping times, gradient restriction and approximate martingales, we set up the framework to perform the algorithm for the special type of reset option. After that, we elaborate on the procedures for the reset option pricing in...
In order to solve the Bermuda reset option in the presence of transaction costs, the Markov chain and dual analysis are adopted in the pricing procedures. By introducing mixed stopping times, gradient restriction and domain restriction, we construct the framework which is essential for us to perform the algorithm. After the basic setups, we elaborate on the procedures for the reset option pricing...
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