Related papers: How to make Dupire's local volatility work with ju…

Identifying the instances of jumps in a discrete-time-series sample of a jump diffusion model is a challenging task. We have developed a novel statistical technique for jump detection and volatility estimation in a return time series data…

Standard models of asset price dynamics, such as geometric Brownian motion (see, for example, Osborne, 1959, Samuelson, 2016), do not formally incorporate investor inertia. This paper presents a two-stage framework for modelling this…

Using an operator-theoretic framework in a Hilbert-space setting, we perform a detailed spectral analysis of the one-dimensional Laplacian in a bounded interval, subject to specific non-self-adjoint connected boundary conditions modelling a…

In this article we extend earlier work on the jump-diffusion risk-sensitive asset management problem [SIAM J. Fin. Math. (2011) 22-54] by allowing jumps in both the factor process and the asset prices, as well as stochastic volatility and…

The scaling invariance for chaotic orbits near a transition from unlimited to limited diffusion in a dissipative standard mapping is explained via the analytical solution of the diffusion equation. It gives the probability of observing a…

We propose model-free (nonparametric) estimators of the volatility of volatility and leverage effect using high-frequency observations of short-dated options. At each point in time, we integrate available options into estimates of the…

We consider a stochastic volatility model with jumps where the underlying asset price is driven by the process sum of a 2-dimensional Brownian motion and a 2-dimensional compensated Poisson process. The market is incomplete, resulting in…

Observing prices of European put and call options, we calibrate exponential L\'evy models nonparametrically. We discuss the efficient implementation of the spectral estimation procedures for L\'evy models of finite jump activity as well as…

Motivated by marginals-mimicking results for It\^o processes via SDEs and by their applications to volatility modeling in finance, we discuss the weak convergence of the law of a hypoelliptic diffusions conditioned to belong to a target…

We investigate the pricing of cliquet options in a jump-diffusion model. The considered option is of monthly sum cap style while the underlying stock price model is driven by a drifted L\'{e}vy process entailing a Brownian diffusion…

In this paper, we focus on option pricing models based on space-time fractional diffusion. We briefly revise recent results which show that the option price can be represented in the terms of rapidly converging double-series and apply these…

The purpose of this paper is to analyze the problem of option pricing when the short rate follows subdiffusive fractional Merton model. We incorporate the stochastic nature of the short rate in our option valuation model and derive explicit…

This paper considers a portfolio optimization problem in which asset prices are represented by SDEs driven by Brownian motion and a Poisson random measure, with drifts that are functions of an auxiliary diffusion 'factor' process. The…

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…

For positive recurrent jumping-in diffusions with large jumps, we study scaling limits of the fluctuations of inverse local times and occupation times. We generalize the eigenfunctions with modified Neumann boundary condition, which have…

Using tools from spectral analysis, singular and regular perturbation theory, we develop a systematic method for analytically computing the approximate price of a derivative-asset. The payoff of the derivative-asset may be path-dependent.…

In this paper, we study Dirichlet problem for non-local operator on bounded domains in ${\mathbb R}^d$ $$ {\cal L}u = {\rm div}(A(x) \nabla (x)) + b(x) \cdot \nabla u(x) + \int_{{\mathbb R}^d} (u(y)-u(x) ) J(x, dy) , $$ where…

We take a new look at the problem of disentangling the volatility and jumps processes of daily stock returns. We first provide a computational framework for the univariate stochastic volatility model with Poisson-driven jumps that offers a…

In this chapter, we consider volatility swap, variance swap and VIX future pricing under different stochastic volatility models and jump diffusion models which are commonly used in financial market. We use convexity correction approximation…

It has been recently shown that spot volatilities can be very well modeled by rough stochastic volatility type dynamics. In such models, the log-volatility follows a fractional Brownian motion with Hurst parameter smaller than 1/2. This…