Related papers: Limit Laws in Transaction-Level Asset Price Models

Executing a basket of co-integrated assets is an important task facing investors. Here, we show how to do this accounting for the informational advantage gained from assets within and outside the basket, as well as for the permanent price…

No-arbitrage asset pricing characterizes valuation through the existence of equivalent martingale measures relative to a filtration and a class of admissible trading strategies. In practice, pricing is performed across multiple asset…

We consider Stochastic Volatility processes with heavy tails and possible long memory in volatility. We study the limiting conditional distribution of future events given that some present or past event was extreme (i.e. above a level which…

Limit distributions for the greatest convex minorant and its derivative are considered for a general class of stochastic processes including partial sum processes and empirical processes, for independent, weakly dependent and long range…

Event sequences can be modeled by temporal point processes (TPPs) to capture their asynchronous and probabilistic nature. We propose an intensity-free framework that directly models the point process distribution by utilizing normalizing…

Providing a measure of market risk is an important issue for investors and financial institutions. However, the existing models for this purpose are per definition symmetric. The current paper introduces an asymmetric capital asset pricing…

In the present paper we construct stock price processes with the same marginal log-normal law as that of a geometric Brownian motion and also with the same transition density (and returns' distributions) between any two instants in a given…

This article generalises the concept of realised covariation to Hilbert-space-valued stochastic processes. More precisely, based on high-frequency functional data, we construct an estimator of the trace-class operator-valued integrated…

We introduce a class of randomly time-changed fast mean-reverting stochastic volatility models and, using spectral theory and singular perturbation techniques, we derive an approximation for the prices of European options in this setting.…

We introduce a novel stochastic volatility model where the squared volatility of the asset return follows a Jacobi process. It contains the Heston model as a limit case. We show that the joint density of any finite sequence of log returns…

We consider parametric inference for an ergodic and stationary diffusion process, when the data are high-frequency observations of the integral of the diffusion process. Such data are obtained via certain measurement devices, or if…

We consider the computation of model-free bounds for multi-asset options in a setting that combines dependence uncertainty with additional information on the dependence structure. More specifically, we consider the setting where the…

In some estimation problems, especially in applications dealing with information theory, signal processing and biology, theory provides us with additional information allowing us to restrict the parameter space to a finite number of points.…

Financial contagion has been widely recognized as a fundamental risk to the financial system. Particularly potent is price-mediated contagion, wherein forced liquidations by firms depress asset prices and propagate financial stress,…

Cascades of events and extreme occurrences have garnered significant attention across diverse domains such as financial markets, seismology, and social physics. Such events can stem either from the internal dynamics inherent to the system…

Near equilibrium, the symmetric part of the time-integrated steady-state covariance, i.e., the time integral of correlation functions, is governed by the fluctuation-dissipation theorem, while the antisymmetric part vanishes due to Onsager…

Continuous time random walks (CTRWs) are used in physics to model anomalous diffusion, by incorporating a random waiting time between particle jumps. In finance, the particle jumps are log-returns and the waiting times measure delay between…

This paper studies arbitrage pricing theory in financial markets with implicit transaction costs. We extend the existing theory to include the more realistic possibility that the price at which the investors trade is dependent on the traded…

In this paper we introduce a multilevel specification with stochastic volatility for repeated cross-sectional data. Modelling the time dynamics in repeated cross sections requires a suitable adaptation of the multilevel framework where the…

We study a dynamic portfolio optimization problem related to convergence trading, which is an investment strategy that exploits temporary mispricing by simultaneously buying relatively underpriced assets and selling short relatively…