Related papers: Completeness of bond market driven by L\'evy proce…

This paper gives examples of explicit arbitrage-free term structure models with L\'evy jumps via state price density approach. By generalizing quadratic Gaussian models, it is found that the probability density function of a L\'evy process…

We present an algorithm producing a dynamic non-self-financing hedging strategy in an incomplete market corresponding to investor-relevant risk criterion. The optimization is a two stage process that first determines admissible model…

We present cross and time series analysis of price fluctuations in the U.S. Treasury fixed income market. By means of techniques borrowed from statistical physics we show that the correlation among bonds depends strongly on the maturity and…

We investigate the problem of pricing and hedging derivatives of Electricity Futures contract when the underlying asset is not available. We propose to use a cross hedging strategy based on the Futures contract covering the larger delivery…

We revisit Merton's portfolio optimization problem under boun-ded state-dependent utility functions, in a market driven by a L\'evy process $Z$ extending results by Karatzas et. al. (1991) and Kunita (2003). The problem is solved using a…

We propose an option approach for pricing bond illiquidity that is reminiscent of the celebrated work of Longstaff (1995) on the non-marketability of some non-dividend-paying shares in IPOs. This approach describes a quite common situation…

As operators acting on the undetermined final settlement of a derivative security, expectation is linear but price is non-linear. When the market of underlying securities is incomplete, non-linearity emerges from the bid-offer around the…

Martingale solutions of stochastic Navier-Stokes equations in 2D and 3D possibly unbounded domains, driven by the L\'evy noise consisting of the compensated time homogeneous Poisson random measure and the Wiener process are considered.…

In most illiquid markets, there is no obvious proxy for the market price of an asset. The European corporate bond market is an archetypal example of such an illiquid market where mid-prices can only be estimated with a statistical model. In…

We consider an equity-linked contract whose payoff depends on the lifetime of policy holder and the stock price. We assume the limited capital for hedging and we provide with the best strategy for an insurance company in the meaning of so…

The classical concept of bounded completeness and its relation to sufficiency and ancillarity play a fundamental role in unbiased estimation, unbiased testing, and the validity of inference in the presence of nuisance parameters. In this…

This paper introduces a dynamic change of measure approach for computing the analytical solutions of expected future prices (and therefore, expected returns) of contingent claims over a finite horizon. The new approach constructs hybrid…

We investigate the relation of the semigroup probability density of an infinite activity L\'{e}vy process to the corresponding L\'{e}vy density. For subordinators, we provide three methods to compute the former from the latter. The first…

We consider a stochastic volatility model with jumps where the underlying asset price is driven by the process sum of a 2-dimensional Brownian motion and a 2-dimensional compensated Poisson process. The market is incomplete, resulting in…

Model uncertainty is a type of inevitable financial risk. Mistakes on the choice of pricing model may cause great financial losses. In this paper we investigate financial markets with mean-volatility uncertainty. Models for stock markets…

We theoretically prove why statistically rejecting the null hypothesis of perfect competition is challenging, known as a common problem in the literature. We also assess the finite sample performance of the conduct parameter test in…

Demographic projections of future mortality rates involve a high level of uncertainty and require stochastic mortality models. The current paper investigates forward mortality models driven by a (possibly infinite dimensional) Wiener…

This paper focuses on hypothesis testing for the input of a L\'evy-driven storage system by sampling of the storage level. As the likelihood is not explicit we propose two tests that rely on transformation of the data. The first approach…

We derive a new equation for the optimal investment boundary of a general irreversible investment problem under exponential L\'evy uncertainty. The problem is set as an infinite time-horizon, two-dimensional degenerate singular stochastic…

We study valuation of swing options on commodity markets when the commodity prices are driven by multiple factors. The factors are modeled as diffusion processes driven by a multidimensional L\'evy process. We set up a valuation model in…