Related papers: Completeness of bond market driven by L\'evy proce…
We consider Malliavin calculus based on the It\^o chaos decomposition of square integrable random variables on the L\'evy space. We show that when a random variable satisfies a certain measurability condition, its differentiability and…
We derive a backward and forward nonlinear PDEs that govern the implied volatility of a contingent claim whenever the latter is well-defined. This would include at least any contingent claim written on a positive stock price whose payoff at…
We study the portfolio problem of maximizing the outperformance probability over a random benchmark through dynamic trading with a fixed initial capital. Under a general incomplete market framework, this stochastic control problem can be…
We study contingent claims in a discrete-time market model where trading costs are given by convex functions and portfolios are constrained by convex sets. In addition to classical frictionless markets and markets with transaction costs or…
This study presents contemporaneous modeling of asset return and price range within the framework of stochastic volatility with leverage. A new representation of the probability density function for the price range is provided, and its…
We investigate Wiener-transformable markets, where the driving process is given by an adapted transformation of a Wiener process. This includes processes with long memory, like fractional Brownian motion and related processes, and, in…
An efficient method to price bonds with optional sinking feature is presented. Such instruments equip their issuer with the option (but not the obligation) to redeem parts of the notional prior to maturity, therefore the future cash flows…
The important application of semi-static hedging in financial markets naturally leads to the notion of quasi self-dual processes. The focus of our study is to give new characterizations of quasi self-duality for exponential L\'evy processes…
The geometric approach to financial markets with proportional transaction cost prescribes to imbed a specific model (of stock market, of currency market etc.), usually given in a parametric form, into a natural framework defined by the two…
We study a problem of optimal investment/consumption over an infinite horizon in a market consisting of two possibly correlated assets: one liquid and one illiquid. The liquid asset is observed and can be traded continuously, while the…
We model the price of a stock via a Lang\'{e}vin equation with multi-dimensional fluctuations coupled in the price and in time. We generalize previous models in that we assume that the fluctuations conditioned on the time step are compound…
The problem of disorder seeks to determine a stopping time which is as close as possible to the unknown time of ``disorder'' when the observed process changes its probability characteristics. We give a partial answer to this question for…
Rough volatility models are known to reproduce the behavior of historical volatility data while at the same time fitting the volatility surface remarkably well, with very few parameters. However, managing the risks of derivatives under…
In the spirit of Bj\"ork-DiMasi-Kabanov-Runggaldier, we investigate term structure models driven by Wiener process and Poisson measures with forward curve dependent volatilities. This includes a full existence and uniqueness proof for the…
Prediction markets are often described as mechanisms that ``aggregate information'' into prices, yet the mapping from dispersed private information to observed market histories is typically noisy, endogenous, and shaped by heterogeneous and…
In this article we propose a study of market models starting from a set of axioms, as one does in the case of risk measures. We define a market model simply as a mapping from the set of adapted strategies to the set of random variables…
Resolving an open question of J. A. Carillo and G. Toscani, M. Stawiska recently proved that certain metric spaces of probability measures equipped with Fourier-based metrics are complete. In this note, we extend such Fourier-based metrics…
In quantitative finance, we often model asset prices as a noisy Ito semimartingale. As this model is not identifiable, approximating by a time-changed Levy process can be useful for generative modelling. We give a new estimate of the…
This paper studies an infinite horizon optimal tracking portfolio problem using capital injection in incomplete market models. The benchmark process is modelled by a geometric Brownian motion with zero drift driven by some unhedgeable risk.…
We study superhedging of contingent claims with physical delivery in a discrete-time market model with convex transaction costs. Our model extends Kabanov's currency market model by allowing for nonlinear illiquidity effects. We show that…