Related papers: Jump-diffusion modeling in emission markets
We discuss price variations distributions in foreign exchange markets, characterizing them both in calendar and business time frameworks. The price dynamics is found to be the result of two distinct processes, a multi-variance diffusion and…
Polynomial jump-diffusions constitute a class of tractable stochastic models with wide applicability in areas such as mathematical finance and population genetics. We provide a full parameterization of polynomial jump-diffusions on the unit…
A discretization scheme for nonnegative diffusion processes is proposed and the convergence of the corresponding sequence of approximate processes is proved using the martingale problem framework. Motivations for this scheme come typically…
This paper is the first part of a series of papers on filtering for partially observed jump diffusions satisfying a stochastic differential equation driven by Wiener processes and Poisson martingale measures. The coefficients of the…
Over the last decade, dividends have become a standalone asset class instead of a mere side product of an equity investment. We introduce a framework based on polynomial jump-diffusions to jointly price the term structures of dividends and…
We study a one-dimensional Markov modulated random walk with jumps. It is assumed that amplitudes of jumps as well as a chosen velocity regime are random and depend on a time spent by the process at a previous state of the underlying Markov…
In the presence of quantum measurements with direct photon detection the evolution of open quantum systems is usually described by stochastic master equations with jumps. Heuristically, from these equations one can obtain diffusion models…
We present an agent behavior based microscopic model that induces jumps, spikes and high volatility phases in the price process of a traded asset. We transfer dynamics of thermally activated jumps of an unexcited/ excited two state system…
In this paper, a pricing formula for volatility swaps is delivered when the underlying asset follows the stochastic volatility model with jumps and stochastic intensity. By using Feynman-Kac theorem, a partial integral differential equation…
We present a data-driven framework to model the stochastic evolution of volume-price distribution from the New York Stock Exchange (NYSE) equities. The empirical distributions are sampled every 10 minutes over 976 trading days, and fitted…
We briefly review statistical models for the probability distribution of money developed in the econophysics literature since the late 1990s. In these models, economic transactions are modeled as random transfers of money between the agents…
For one-dimensional Jump-Drift and Jump-Diffusion processes converging towards some steady state, the large deviations of a long dynamical trajectory are described from two perspectives. Firstly, the joint probability of the empirical…
We study a market model in which the volatility of the stock may jump at a random time from a fixed value to another fixed value. This model was already described in the literature. We present a new approach to the problem, based on partial…
Central Banks interventions are frequent in response to exogenous events with direct implications on financial market volatility. In this paper, we introduce the Asymmetric Jump Multiplicative Error Model (AJM), which accounts for a…
This paper investigates the pricing of financial derivatives and the calculation of their delta Greek when the underlying asset is a jump-diffusion process in which the stochastic intensity component follows the CIR process. Utilizing…
Sustaining efficiency and stability by properly controlling the equity to asset ratio is one of the most important and difficult challenges in bank management. Due to unexpected and abrupt decline of asset values, a bank must closely…
The rapid growth of weather-dependent renewable generation increases price volatility and imbalance penalty risk in power markets, creating the need for advanced quantitative trading strategies. We develop a data-driven continuous-time…
By discretising space into compartments and letting system dynamics be governed by the reaction-diffusion master equation, it is possible to derive and simulate a stochastic model of reaction and diffusion on an arbitrary domain. However,…
We develop a stochastic macro-financial model in continuous time by integrating two specifications of the Keen economic framework with a financial market driven by a jump-diffusion process. The economic block of the model combines monetary…
In this article, we provide representations of European and American exchange option prices under stochastic volatility jump-diffusion (SVJD) dynamics following models by Merton (1976), Heston (1993), and Bates (1996). A Radon-Nikodym…