arXiv subjects

Richard J Martin

Publications and source records attributed to Richard J Martin.

4 recordsLinked to original sources

arXiv2026

A CDS Option Miscellany

CDS options allow investors to express a view on spread volatility and obtain a wider range of payoffs than are possible with vanilla CDS. We give a detailed exposition of different types of single-name CDS option, including options with upfront protection payment, recovery options and recovery swaps, and also presents a new formula for the index option. The emphasis is on using the Black-76 formula where possible and ensuring consistency within asset classes. In the framework shown here the `armageddon event' does not require special attention.

q-fin.PR↗

arXiv2019

Stochastic entropy production in diffusive systems

Computing the stochastic entropy production associated with the evolution of a stochastic dynamical system is a well-established problem. In a small number of cases such as the Ornstein-Uhlenbeck process, of which we give a complete exposition, the distribution of entropy production can be obtained analytically, but in general it is much harder. A recent development in solving the Fokker-Planck equation, in which the solution is written as a product of positive functions, enables the distribution to be obtained approximately, with the assistance of simple numerical techniques. Using examples in one and higher dimension, we demonstrate how such a framework is very convenient for the computation of stochastic entropy production in diffusion processes.

cond-mat.stat-mech↗

arXiv2016

Universal trading under proportional transaction costs

The theory of optimal trading under proportional transaction costs has been considered from a variety of perspectives. In this paper, we show that all the results can be interpreted using a universal law, illustrating the results in trading algorithm design.

q-fin.TR↗

arXiv2011

Saddlepoint methods in portfolio theory

We discuss the use of saddlepoint methods in the analysis of portfolios, with particular reference to credit portfolios. The objective is to proceed from a model of the loss distribution, given through probabilities, correlations and the like, to an analytical approximation of the distribution. Once this is done we show how to derive the so-called risk contributions which are the derivatives of risk measures, such as a given quantile (VaR) or expected shortfall, to the allocations in the underlying assets. These show, informally, where the risk is coming from, and also indicate how to go about optimising the portfolio.

q-fin.PM↗