Related papers: Heat Kernel Framework for Asset Pricing in Finite …
A new framework for asset pricing based on modelling the information available to market participants is presented. Each asset is characterised by the cash flows it generates. Each cash flow is expressed as a function of one or more…
The risk premium is one of main concepts in mathematical finance. It is a measure of the trade-offs investors make between return and risk and is defined by the excess return relative to the risk-free interest rate that is earned from an…
The crisis that affected financial markets in the last years leaded market practitioners to revise well known basic concepts like the ones of discount factors and forward rates. A single yield curve is not sufficient any longer to describe…
This paper is devoted to a study of robust fundamental theorems of asset pricing in discrete time and finite horizon settings. Uncertainty is modelled by a (possibly uncountable) family of price processes on the same probability space. Our…
In this paper, we study purely discontinuous symmetric Markov processes on closed subsets of ${\mathbb R}^d$, $d\ge 1$, with jump kernels of the form $J(x,y)=|x-y|^{-d-\alpha}{\mathcal B}(x,y)$, $\alpha\in (0,2)$, where the function…
We consider a financial market in discrete time and study pricing and hedging conditional on the information available up to an arbitrary point in time. In this conditional framework, we determine the structure of arbitrage-free prices.…
A homogeneously saturated equation for the time development of the price of a financial asset is presented and investigated for the pricing of European call options using noise that is distributed as a Student's t-distribution. In the limit…
In this paper, we study a family of stochastic volatility processes; this family features a mean reversion term for the volatility and a double CEV-like exponent that generalizes SABR and Heston's models. We derive approximated closed form…
This paper investigates how the conditional quantiles of future returns and volatility of financial assets vary with various measures of ex-post variation in asset prices as well as option-implied volatility. We work in the flexible…
The Heat Kernel Method is applied to the constituent quark model. We calculate the effect of thermal quark fluctuations on the meson action and the resulting quark condensate and pi pi-scattering amplitude at finite temperature. The quarks…
We introduce a class of short-rate models that exhibit a ``higher for longer'' phenomenon. Specifically, the short-rate is modeled as a general time-homogeneous one-factor Markov diffusion on a finite interval. The lower endpoint is assumed…
This paper provides explicit pointwise formulas for the heat kernel on compact metric measure spaces that belong to a $(\mathbb{N}\times\mathbb{N})$-parameter family of fractals which are regarded as projective limits of metric measure…
We consider the theory of bond discounts, defined as the difference between the terminal payoff of the contract and its current price. Working in the setting of finite-dimensional realizations in the HJM framework, under suitable notions of…
We introduce a discrete binary tree for pricing contingent claims with the underlying security prices exhibiting history dependence characteristic of that induced by market microstructure phenomena. Example dependencies considered include…
Up to now, the nonparametric analysis of multidimensional continuous-time Markov processes has focussed strongly on specific model choices, mostly related to symmetry of the semigroup. While this approach allows to study the performance of…
This paper presents a convenient framework for modeling default process and pricing derivative securities involving credit risk. The framework provides an integrated view of credit valuation adjustment by linking distance-to-default,…
This paper proposes to model asset price dynamics with a mixture of diffusion processes where the instantaneous volatility of the underlying diffusion process contains a random vector. The marginal probability distributions of the proposed…
Large tick assets, i.e. assets where one tick movement is a significant fraction of the price and bid-ask spread is almost always equal to one tick, display a dynamics in which price changes and spread are strongly coupled. We introduce a…
We introduce a Vasicek-type short rate model which has two additional parameters representing memory effect. This model presents better results in yield curve fitting than the classical Vasicek model. We derive closed-form expressions for…
We present a function-valued stochastic volatility model designed to capture the continuous-time evolution of forward curves in fixed-income or commodity markets. The dynamics of the (logarithmic) forward curves are defined by a…