Related papers: Stock Price Dynamics and Option Valuations under V…
The price multiplier effect provides precious insight into the behavior of investors during episodes of speculative trading. It tells us that the higher the price of an asset is (within a set of similar assets) the more its price is likely…
In the classical model of stock prices which is assumed to be Geometric Brownian motion, the drift and the volatility of the prices are held constant. However, in reality, the volatility does vary. In quantitative finance, the Heston model…
We study several aspects of the so-called low-vol and low-beta anomalies, some already documented (such as the universality of the effect over different geographical zones), others hitherto not clearly discussed in the literature. Our most…
Real life hedging in the Black-Scholes model must be imperfect and if the stock's drift is higher than the risk free rate, leads to a profit on average. Hence the option price is examined as a fair game agreement between the parties, based…
We study the relationship between price spread, volatility and trading volume. We find that spread forms as a result of interplay between order liquidity and order impact. When trading volume is small adding more liquidity helps improve…
We consider the tail probabilities of stock returns for a general class of stochastic volatility models. In these models, the stochastic differential equation for volatility is autonomous, time-homogeneous and dependent on only a finite…
Diffusion processes driven by Fractional Brownian motion (FBM) have often been considered in modeling stock price dynamics in order to capture the long range dependence of stock price observed in reality. Option prices for such models had…
We study convexity and monotonicity properties of option prices in a model with jumps using the fact that these prices satisfy certain parabolic integro-differential equations. Conditions are provided under which preservation of convexity…
This paper studies equity basket options -- i.e., multi-dimensional derivatives whose payoffs depend on the value of a weighted sum of the underlying stocks -- and develops a new and innovative approach to ensure consistency between options…
The paper proposes a class of financial market models which are based on inhomogeneous telegraph processes and jump diffusions with alternating volatilities. It is assumed that the jumps occur when the tendencies and volatilities are…
In commodity and energy markets swing options allow the buyer to hedge against futures price fluctuations and to select its preferred delivery strategy within daily or periodic constraints, possibly fixed by observing quoted futures…
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…
In this work, we aim to reconcile several apparently contradictory observations in market microstructure: is the famous "square-root law" of metaorder impact, which decays with time, compatible with the random-walk nature of prices and the…
The fundamental theorem behind financial markets is that stock prices are intrinsically complex and stochastic. One of the complexities is the volatility associated with stock prices. Volatility is a tendency for prices to change…
We consider stochastic volatility models under parameter uncertainty and investigate how model derived prices of European options are affected. We let the pricing parameters evolve dynamically in time within a specified region, and…
We introduce a general decision tree framework to value an option to invest/divest in a project, focusing on the model risk inherent in the assumptions made by standard real option valuation methods. We examine how real option values depend…
We address the question of how stock prices respond to changes in demand. We quantify the relations between price change $G$ over a time interval $\Delta t$ and two different measures of demand fluctuations: (a) $\Phi$, defined as the…
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…
Volatility is a natural risk measure in finance as it quantifies the variation of stock prices. A frequently considered problem in mathematical finance is to forecast different estimates of volatility. What makes it promising to use deep…
We study the asymptotic behavior of distribution densities arising in stock price models with stochastic volatility. The main objects of our interest in the present paper are the density of time averages of the squared volatility process…