Related papers: Jump-diffusion modeling in emission markets
We show how inter-asset dependence information derived from market prices of options can lead to improved model-free price bounds for multi-asset derivatives. Depending on the type of the traded option, we either extract correlation…
We study the optimal timing of derivative purchases in incomplete markets. In our model, an investor attempts to maximize the spread between her model price and the offered market price through optimally timing her purchase. Both the…
We explore martingale and convex duality techniques to study optimal investment strategies that maximize expected risk-averse utility from consumption and terminal wealth. We consider a market model with jumps driven by (multivariate)…
Affine jump-diffusions constitute a large class of continuous-time stochastic models that are particularly popular in finance and economics due to their analytical tractability. Methods for parameter estimation for such processes require…
How do cost shocks pass through to prices in markets with price dispersion? We decompose the problem into two layers. In the competition layer, consumers' consideration sets determine equilibrium distributions of normalized margins. In the…
In Part II of this paper, we concentrate our analysis on the price dynamical model with the moving average rules developed in Part I of this paper. By decomposing the excessive demand function, we reveal that it is the interplay between…
In the paper we study dynamics of the arbitrage prices of credit default swaps within a hazard process model of credit risk. We derive these dynamics without postulating that the immersion property is satisfied between some relevant…
We derive a general multivariate theory for realised characteristics of `model-free discretisation-invariant swaps', so-called because the standard no-arbitrage assumption of martingale forward prices is sufficient to derive fair-value swap…
In this paper we investigate jump-diffusion processes in random environments which are given as the weak solutions to SDE's. We formulate conditions ensuring existence and uniqueness in law of solutions. We investigate Markov property. To…
We study a family of mean field games with a state variable evolving as a multivariate jump diffusion process. The jump component is driven by a Poisson process with a time-dependent intensity function. All coefficients, i.e. drift,…
We present a Markovian market model driven by a hidden Brownian efficient price. In particular, we extend the queue-reactive model, making its dynamics dependent on the efficient price. Our study focuses on two sub-models: a signal-driven…
An analytic model is presented that considers the evolution of a market of durable goods. The model suggests that after introduction goods spread always according to a Bass diffusion. However, this phase will be followed by a diffusion…
We consider pricing weather derivatives for use as protection against weather extremes. The method described utilizes results from spatial statistics and extreme value theory to first model extremes in the weather as a max-stable process,…
We consider the so-called $\natural$-model. It is an one-default model which gives the conditional law of a random time with respect to a reference filtration. This model has been studied in the case where the parameters are continuous. In…
Motivated by empirical observations on the interplay of trends and reversion, a lattice gas model of financial markets is presented. The shares of an asset are modeled by gas molecules that are distributed across a hidden social network of…
We propose methods to infer jumps of a semi-martingale, which describes long-term price dynamics, based on discrete, noisy, high-frequency observations. Different to the classical model of additive, centered market microstructure noise, we…
In this short paper, in order to price occupation-time options, such as (double-barrier) step options and quantile options, we derive various joint distributions of a mixed-exponential jump-diffusion process and its occupation times of…
This paper addresses the challenges of pricing exotic options and structured products, which traditional models often fail to handle due to their inability to capture real-world market phenomena like fat-tailed distributions and volatility…
The continuous time model of dynamic asset trading is the central model of modern finance. Because trading cannot in fact take place at every moment of time, it would seem desirable to show that the continuous time model can be viewed as…
The volatility characterizes the amplitude of price return fluctuations. It is a central magnitude in finance closely related to the risk of holding a certain asset. Despite its popularity on trading floors, the volatility is unobservable…