xVA is a collection of valuation adjustments made to the classical risk-neutral valuation of a derivative or derivatives portfolio for pricing or for accounting purposes, and it has been a matter of debate and controversy. This presentation is intended to clarify the notion of xVA as well as the usage of the xVA items in…
A commonly used stochastic model for the derivative and commodity market analysis is the Barndorff-Nielsen and Shephard (BN-S) model. At first, an application of the BN-S model will be presented to find an optimal hedging strategy for the oil commodity from the Bakken, a new region of oil extraction that is benefiting from fracking technology.…
Motivated by modeling borrowing and lending between banks, we start by illustrating systemic risk with a toy model of diffusions processes coupled through their drifts. We then show that such a simplistic model is in fact a Nash equilibrium of a Linear-Quadratic differential game. In order to take into account clearing debt obligations a delay…
We present a new combined Mean Field Control Game (MFCG) problem which can be interpreted as a competitive game between collaborating groups and its solution as a Nash equilibrium between the groups. Within each group the players coordinate their strategies. An example of such a situation is a modification of the classical trader's problem. Groups…
This article is about yield farming, which refers to a decentralized finance strategy of providing liquidity and seeking associated rewards in the form of transpired-transaction fees. We explain and demystify yield farming and quantify transaction costs, returns, and risks using on-chain data from major decentralized exchanges. We provide a mathematical framework that resembles a representative…