Related papers: Discretely sampled variance and volatility swaps v…

We discuss the asymptotic behaviour of risk-based indifference prices of European contingent claims in discrete-time financial markets under volatility uncertainty as the number of intermediate trading periods tends to infinity. The…

We derive a new high-order compact finite difference scheme for option pricing in stochastic volatility models. The scheme is fourth-order accurate in space and second-order accurate in time. Under some restrictions, theoretical results…

We study a new measure of codependency in the second moment of a continuous-time multivariate asset price process, which we name the realized copula of volatility. The statistic is based on local volatility estimates constructed from…

This paper focuses on the pricing of the variance swap in an incomplete market where the stochastic interest rate and the price of the stock are respectively driven by Cox-Ingersoll-Ross model and Heston model with simultaneous L\'{e}vy…

Usually, given a continuous-time nonlinear model, a closed form solution for an exact discretization cannot be found explicitly, originating the need of approximating discrete-time models. This note studies the preservation of the Lipschitz…

We strengthen a result of two of us on the existence of effective interactions for discretised continuous-spin models. We also point out that such an interaction cannot exist at very low temperatures. Moreover, we compare two ways of…

We present an arbitrage free theoretical framework for modeling bid and ask prices of dividend paying securities in a discrete time setup using theory of dynamic acceptability indices. In the first part of the paper we develop the theory of…

We propose Monte Carlo calibration algorithms for three models: local volatility with stochastic interest rates, stochastic local volatility with deterministic interest rates, and finally stochastic local volatility with stochastic interest…

We establish sharp well-posedness and approximation estimates for variational saddle point systems at the continuous level. The main results of this note have been known to be true only in the finite dimensional case. Known spectral results…

This paper studies dynamic monopoly pricing for a broad class of settings that allow for multiple durable, multiple rental, or a mix of varieties. We show that the driving force behind pricing dynamics is the existence of trading-up…

The relationship between price volatilty and a market extremum is examined using a fundamental economics model of supply and demand. By examining randomness through a microeconomic setting, we obtain the implications of randomness in the…

We consider the randomness of market trade as the origin of price and return stochasticity. We look at time series of trade values and volumes as random variables during the averaging interval {\Delta} and describe the dependences of…

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…

In this paper we present a theoretical framework for determining dynamic ask and bid prices of derivatives using the theory of dynamic coherent acceptability indices in discrete time. We prove a version of the First Fundamental Theorem of…

Continuous time financial market models are often motivated as scaling limits of discrete time models. The objective of this paper is to establish such a connection for a robust framework. More specifically, we consider discrete time models…

This paper considers a distributionally robust chance constraint model with a general ambiguity set. We show that a sample based approximation of this model converges under suitable sufficient conditions. We also show that upper and lower…

In a stochastic volatility framework, we find a general pricing equation for the class of payoffs depending on the terminal value of a market asset and its final quadratic variation. This allows a pricing tool for European-style claims…

We apply the formalism of the continuous time random walk to the study of financial data. The entire distribution of prices can be obtained once two auxiliary densities are known. These are the probability densities for the pausing time…

We study the local volatility function in the Foreign Exchange market where both domestic and foreign interest rates are stochastic. This model is suitable to price long-dated FX derivatives. We derive the local volatility function and…

In the paper discrete time shadow price is constructed for the market with several assets with given bid and ask prices. Shadow price is the price such that the problem of optimal utility from terminal wealth on the market without…