Related papers: Jump-diffusion modeling in emission markets
This paper considers the ideal gas-like model of trading markets, where each individual is identified as a gas molecule that interacts with others trading in elastic or money-conservative collisions. Traditionally this model introduces…
We present a set of models of the main stylized facts of market price fluctuations. These models comprise dynamical evolution with threshold dynamics and Langevin price equation with multiplicative noise, percolation models to describe the…
This article studies a portfolio optimization problem, where the market consisting of several stocks is modeled by a multi-dimensional jump-diffusion process with age-dependent semi-Markov modulated coefficients. We study risk sensitive…
In the information-based approach to asset pricing the market filtration is modelled explicitly as a superposition of signals concerning relevant market factors and independent noise. The rate at which the signal is revealed to the market…
In this paper we provide a comprehensive analysis of a structural model for the dynamics of prices of assets traded in a market originally proposed in [1]. The model takes the form of an interacting generalization of the geometric Brownian…
This paper considers a Markovian model of a limit order book where time-dependent rates are allowed. With the objective of understanding the mechanisms through which a microscopic model of an orderbook can converge to more general diffusion…
Models to price long term loans in the securities lending business are developed. These longer horizon deals can be viewed as contracts with optionality embedded in them. This insight leads to the usage of established methods from…
This work deals with an optimal asset allocation problem for a defined contribution (DC) pension plan during its accumulation phase. The contribution rate is proportional to the individual's salary, the dynamics of which follows a Heston…
We introduce a statistical test for simultaneous jumps in the price of a financial asset and its volatility process. The proposed test is based on high-frequency data and is robust to market microstructure frictions. For the test, local…
Diffusion models are a class of probabilistic generative models that have been widely used as a prior for image processing tasks like text conditional generation and inpainting. We demonstrate that these models can be adapted to make…
We introduce and study a non-equilibrium continuous-time dynamical model of the price of a single asset traded by a population of heterogeneous interacting agents in the presence of uncertainty and regulatory constraints. The model takes…
Probabilistic model checking can provide formal guarantees on the behavior of stochastic models relating to a wide range of quantitative properties, such as runtime, energy consumption or cost. But decision making is typically with respect…
The classical linear Black--Scholes model for pricing derivative securities is a popular model in financial industry. It relies on several restrictive assumptions such as completeness, and frictionless of the market as well as the…
The aim of this paper is to solve an optimal investment, consumption and life insurance problem when the investor is restricted to capital guarantee. We consider an incomplete market described by a jump-diffusion model with stochastic…
Model risk measures consequences of choosing a model in a class of possible alternatives. We find analytical and simulated bounds for payoff functions on classes of plausible alternatives of a given discrete model. We measure the impact of…
Starting from the model of continuous time random walk, we focus our interest on random walks in which the probability distributions of the waiting times and jumps have fat tails characterized by power laws with exponent between 0 and 1 for…
Inflation exhibits state-dependent, skewed, and fat-tailed dynamics that make risk a central concern for monetary policy. Accordingly, inflation risks are distributional and cannot be fully captured by mean-based models. We propose a…
A market with asymmetric information can be viewed as a repeated exchange game between the informed sector and the uninformed one. In a market with risk-neutral agents, De Meyer [2010] proves that the price process should be a particular…
We obtain large deviation results for a two time-scale model of jump-diffusion processes. The processes on the two time scales are fully inter-dependent, the slow process has small perturbative noise and the fast process is ergodic. Our…
When the underlying asset displays oscillations, spikes or heavy-tailed distributions, the lognormal diffusion process (for which Black and Scholes developed their momentous option pricing formula) is inadequate: in order to overcome these…