Related papers: Markov switching quadratic term structure models
It has been understood that the "local" existence of the Markowitz' optimal portfolio or the solution to the local-risk minimization problem is guaranteed by some specific mathematical structures on the underlying assets price processes…
We study risk-sharing economies where heterogenous agents trade subject to quadratic transaction costs. The corresponding equilibrium asset prices and trading strategies are characterised by a system of nonlinear, fully-coupled…
In this survey paper we discuss recent advances on short interest rate models which can be formulated in terms of a stochastic differential equation for the instantaneous interest rate (also called short rate) or a system of such equations…
We study hedging and pricing of unattainable contingent claims in a non-Markovian regime-switching financial model. Our financial market consists of a bank account and a risky asset whose dynamics are driven by a Brownian motion and a…
A discrete-time Markov chain can be transformed into a new Markov chain by looking at its states along iterations of an almost surely finite stopping time. By the optional stopping theorem, any bounded harmonic function with respect to the…
Physical systems with many degrees of freedom can often be understood in terms of transitions between a small number of metastable states. For time-homogeneous systems with short-term memory these transitions are fully characterized by a…
We investigate nonlinear regression for nonstationary sequential data. In most real-life applications such as business domains including finance, retail, energy and economy, timeseries data exhibits nonstationarity due to the temporally…
We consider a zero-sum stochastic game for continuous-time Markov chain with countable state space and unbounded transition and pay-off rates. The additional feature of the game is that the controllers together with taking actions are also…
We consider the filtering problem of estimating a hidden random variable $X$ by noisy observations. The noisy observation process is constructed by a randomised Markov bridge (RMB) $(Z_t)_{t\in [0,T]}$ of which terminal value is set to…
This paper deals with control of partially observable discrete-time stochastic systems. It introduces and studies Markov Decision Processes with Incomplete Information and with semi-uniform Feller transition probabilities. The important…
We investigate the time-dependent, coherent, and dissipative dynamics of bound particles in single multilevel quantum dots in the presence of sequential tunnelling transport. We focus on the nonequilibrium regime where several channels are…
In this paper, we consider continuous-time Markov chains with a finite state space under nonlinear expectations. We define so-called Q-operators as an extension of Q-matrices or rate matrices to a nonlinear setup, where the nonlinearity is…
Weconsider Markov decision processes arising from a Markov model of an underlying natural phenomenon. Such phenomena are usually periodic (e.g. annual) in time, and so the Markov processes modelling them must be time-inhomogeneous, with…
In this paper we study various properties of finite stochastic systems or hidden Markov chains as they are alternatively called. We discuss their construction following different approaches and we also derive recursive filtering formulas…
We introduce a rate balance principle for general (not necessarily Markovian) stochastic processes. Special attention is given to processes with birth and death like transitions, for which it is shown that for any state $i$, the rate of two…
There is a well-established theory linking certain semi-Markov chains and continuous-time random walks to time-fractional equations and anomalous diffusion. In this work, we go beyond the semi-Markov framework by considering some…
This paper aims to provide a simple modelling of speculative bubbles and derive some quantitative properties of its dynamical evolution. Starting from a description of individual speculative behaviours, we build and study a second order…
We introduce and analyze a new class of monotone stochastic recursions in a regenerative environment which is essentially broader than that of Markov chains. We prove stability theorems and apply our results {to three canonical models in…
Using a suitable change of probability measure, we obtain a novel Poisson series representation for the arbitrage- free price process of vulnerable contingent claims in a regime-switching market driven by an underlying continuous- time…
In this article, we consider a continuous review (s, S) inventory system with failures of demand fulfillment (service) modeled as a Markov-modulated retrial queueing system. The inventory system features a single product that experiences…