Related papers: Jump-diffusion modeling in emission markets
A combination of reaction-diffusion models with moving-boundary problems yields a system in which the diffusion (spreading and penetration) and reaction (transformation) evolve the system's state and geometry over time. These systems can be…
In this paper we propose a semi-analytic approach to pricing American options for time-dependent jump-diffusions models with exponential jumps The idea of the method is to further generalize our approach developed for pricing barrier,…
We present several models to describe the stochastic evolution of stocks that show some strong resistance at some level and generalize to this situation the evolution based upon geometric Brownian motion. If volatility and drift are related…
Demand forecasting plays an important role in many inventory control problems. To mitigate the potential harms of model misspecification, various forms of distributionally robust optimization have been applied. Although many of these…
We investigate which jump-diffusion models are convexity preserving. The study of convexity preserving models is motivated by monotonicity results for such models in the volatility and in the jump parameters. We give a necessary condition…
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…
This paper proposes a new integrated variance estimator based on order statistics within the framework of jump-diffusion models. Its ability to disentangle the integrated variance from the total process quadratic variation is confirmed by…
The modeling of the probability of joint default or total number of defaults among the firms is one of the crucial problems to mitigate the credit risk since the default correlations significantly affect the portfolio loss distribution and…
We study the problem of option replication under constant proportional transaction costs in models where stochastic volatility and jumps are combined to capture the market's important features. Assuming some mild condition on the jump size…
We study jump-diffusion processes with parameters switching at random times. Being motivated by possible applications, we characterise equivalent martingale measures for these processes by means of the relative entropy. The minimal entropy…
An attempt to obtain market directional information from non-stationary solution of the dynamic equation: "future price tends to the value maximizing the number of shares traded per unit time" is presented. A remarkable feature of the…
In this paper we introduce a bivariate distribution on $\mathbb{R}_{+} \times \mathbb{N}$ arising from a single underlying Markov jump process. The marginal distributions are phase-type and discrete phase-type distributed, respectively,…
This paper examines the problem of pricing spread options under some models with jumps driven by Compound Poisson Processes and stochastic volatilities in the form of Cox-Ingersoll-Ross(CIR) processes. We derive the characteristic function…
We develop a new framework to detect wash trading in crypto assets through real-time liquidity fluctuation. We propose that short-term price jumps in crypto assets results from wash trading-induced liquidity fluctuation, and construct two…
This paper proposes a novel model of financial prices where: (i) prices are discrete; (ii) prices change in continuous time; (iii) a high proportion of price changes are reversed in a fraction of a second. Our model is analytically…
The drift burst hypothesis postulates the existence of short-lived locally explosive trends in the price paths of financial assets. The recent U.S. equity and treasury flash crashes can be viewed as two high-profile manifestations of such…
Arguably the most important problem in quantitative finance is to understand the nature of stochastic processes that underlie market dynamics. One aspect of the solution to this problem involves determining characteristics of the…
We propose and study a simple stochastic model for the dynamics of a limit order book, in which arrivals of market order, limit orders and order cancellations are described in terms of a Markovian queueing system. Through its analytical…
Several models of stock trading [P. Bak et al, Physica A {\bf 246}, 430 (1997)] are analyzed in analogy with one-dimensional, two-species reaction-diffusion-branching processes. Using heuristic and scaling arguments, we show that the…
The paper presents an evolutionary economic model for the price evolution of stocks. Treating a stock market as a self-organized system governed by a fast purchase process and slow variations of demand and supply the model suggests that the…