Related papers: Pricing Fixed-Income Securities in an Information-…
Mainstream financial econometrics methods are based on models well tuned to replicate price dynamics, but with little to no economic justification. In particular, the randomness in these models is assumed to result from a combination of…
Option prices encode the market's collective outlook through implied density and implied volatility. An explicit link between implied density and implied volatility translates the risk-neutrality of the former into conditions on the latter…
We obtain option pricing formulas for stock price models in which the drift and volatility terms are functionals of a continuous history of the stock prices. That is, the stock dynamics follows a nonlinear stochastic functional differential…
A term structure model in which the short rate is zero is developed as a candidate for a theory of cryptocurrency interest rates. The price processes of crypto discount bonds are worked out, along with expressions for the instantaneous…
We consider "time-of-use" pricing as a technique for matching supply and demand of temporal resources with the goal of maximizing social welfare. Relevant examples include energy, computing resources on a cloud computing platform, and…
This project attempts to address the problem of asset pricing in a financial market, where the interest rates and volatilities exhibit regime switching. This is an extension of the Black-Scholes model. Studies of Markov-modulated regime…
In the classical model of stock prices which is assumed to be Geometric Brownian motion, the drift and the volatility of the prices are held constant. However, in reality, the volatility does vary. In quantitative finance, the Heston model…
The paper proposes a method of financial time series forecasting taking into account the semantics of news. For the semantic analysis of financial news the sampling of negative and positive words in economic sense was formed based on…
A new approximate Bayesian inferential framework is proposed that exploits multiple information sources -- daily spot returns, high-frequency spot data and option prices -- and enables fast calculation of probabilistic predictions of future…
In the information-based paradigm of inference, model selection is performed by selecting the candidate model with the best estimated predictive performance. The success of this approach depends on the accuracy of the estimate of the…
In common finance literature, Black-Scholes partial differential equation of option pricing is usually derived with no-arbitrage principle. Considering an asset market, Merton applied the Hamilton-Jacobi-Bellman techniques of his…
In a unified framework we study equilibrium in the presence of an insider having information on the signal of the firm value, which is naturally connected to the fundamental price of the firm related asset. The fundamental value itself is…
No-arbitrage models of term structure have the feature that the return on zero-coupon bonds is the sum of the short rate and the product of volatility and market price of risk. Well known models restrict the behavior of the market price of…
If pricing kernels are assumed non-negative then the inverse problem of finding the pricing kernel is well-posed. The constrained least squares method provides a consistent estimate of the pricing kernel. When the data are limited, a new…
The performance of an energy system under a real-time pricing mechanism depends on the consumption behavior of its customers, which involves uncertainties. In this paper, we consider a system operator that charges its customers with a…
A homogeneously saturated equation for the time development of the price of a financial asset is presented and investigated for the pricing of European call options using noise that is distributed as a Student's t-distribution. In the limit…
We analyze the relative price change of assets starting from basic supply/demand considerations subject to arbitrary motivations. The resulting stochastic differential equation has coefficients that are functions of supply and demand. We…
The problem of pricing the cloud has attracted much recent attention due to the widespread use of cloud computing and cloud services. From a theoretical perspective, several mechanisms that provide strong efficiency or fairness guarantees…
In recent literature it is claimed that BitCoin price behaves more likely to a volatile stock asset than a currency and that changes in its price are influenced by sentiment about the BitCoin system itself; in Kristoufek [10] the author…
Information-theoretic quantities play a crucial role in understanding non-linear relationships between random variables and are widely used across scientific disciplines. However, estimating these quantities remains an open problem,…