arbitrage-free-derivatives-pricing

name	arbitrage-free-derivatives-pricing
description	Arbitrage-free derivatives pricing workflows for consistent discounting, forward construction, and no-arbitrage valuation checks across asset classes. use when tasks involve production valuation models and pricing control frameworks.

Arbitrage Free Derivatives Pricing

objective

Build arbitrage-free pricing pipelines with explicit carry conventions and control-ready valuation diagnostics.

workflow

1. define product payoff, discount curve, and forward construction rules.
2. implement valuation equations and numerical solvers with test fixtures.
3. run no-arbitrage checks across strikes, maturities, and structures.
4. compare model values against market and alternative valuation methods.
5. release only when pricing controls and reconciliations pass thresholds.

required diagnostics

• pricing residual by product, strike, and maturity.
• curve-consistency and forward-construction diagnostics.
• no-arbitrage violations count and severity trends.
• sensitivity reconciliation across greeks and finite differences.
• daily model-versus-market control exceptions.

risk controls

• enforce valuation tolerance thresholds per product class.
• enforce independent price verification and signoff workflow.
• enforce rollback to validated baseline model on control breach.

outputs

• run python scripts/arbitrage_free_derivatives_pricing_diagnostics.py input.csv --output diagnostics.json and keep the json artifact.
• write an implementation memo using references/arbitrage-free-derivatives-pricing-playbook.md with assumptions, tests, limits, and rollout plan.

resources

• use scripts/arbitrage_free_derivatives_pricing_diagnostics.py for deterministic diagnostics.
• use references/arbitrage-free-derivatives-pricing-playbook.md for the domain checklist and delivery structure.