Related papers: Markov switching quadratic term structure models

We give a comprehensive review of credit term structure modeling methodologies. The conventional approach to modeling credit term structure is summarized and shown to be equivalent to a particular type of the reduced form credit risk model,…

We introduce multiple hidden Markov models (MHMMs) where an observed multivariate categorical time series depends on an unobservable multivariate Mar- kov chain. MHMMs provide an elegant framework for specifying various independence…

We study a risk-sharing economy where an arbitrary number of heterogenous agents trades an arbitrary number of risky assets subject to quadratic transaction costs. For linear state dynamics, the forward-backward stochastic differential…

The paper studies an improved estimate for the rate of convergence for nonlinear homogeneous discrete-time Markov chains. These processes are nonlinear in terms of the distribution law. Hence, the transition kernels are dependent on the…

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 consider a short rate model, driven by a stochastic process on the cone of positive semidefinite matrices. We derive sufficient conditions ensuring that the model replicates normal, inverse or humped yield curves.

In this article, we present a Monte Carlo study of phase transition and coarsening dynamics in the non-conserved two-dimensional random-bond $q$-state clock model (RBCM) deriving from a pure clock model [Phys. Rev. E 98, 032109 (2018)].…

Population dynamics are often subject to random independent changes in the environment. For the two strategy stochastic replicator dynamic, we assume that stochastic changes in the environment replace the payoffs and variance. This is…

In the paper we consider some piecewise deterministic Markov process whose continuous component evolves according to semiflows, which are switched at the jump times of a Poisson process. The associated Markov chain describes the states of…

The non-gaussianity of processes observed in financial markets and relatively good performance of gaussian models can be reconciled by replacing the Brownian motion with Levy processes whose Levy densities decay as exp(-lambda|x|) or…

Stock market indices are volatile by nature, and sudden shocks are known to affect volatility patterns. The autoregressive conditional heteroskedasticity (ARCH) and generalized ARCH (GARCH) models neglect structural breaks triggered by…

The embedding problem of Markov transition matrices into continuous-time Markov semigroups is a classic problem that regained a lot of impetus and activities in recent years. We consider it here for the following generalisation of the…

The two main approaches in credit risk are the structural approach pioneered in Merton (1974) and the reduced-form framework proposed in Jarrow & Turnbull (1995) and in Artzner & Delbaen (1995). The goal of this article is to provide a…

We address stability of a class of Markovian discrete-time stochastic hybrid systems. This class of systems is characterized by the state-space of the system being partitioned into a safe or target set and its exterior, and the dynamics of…

This paper is motivated by examples from stochastic reaction network theory. The $Q$-matrix of a stochastic reaction network can be derived from the reaction graph, an edge-labelled directed graph encoding the jump vectors of an associated…

In this paper, we give estimates of the quadratic transportation cost in the conditional central limit theorem for a large class of dependent sequences. Applications to irreducible Markov chains, dynamical systems generated by intermittent…

The article presents a general discrete time dividend valuation model when the dividend growth rate is a general continuous variable. The main assumption is that the dividend growth rate follows a discrete time semi-Markov chain with…

Piecewise-deterministic Markov processes form a general class of non-diffusion stochastic models that involve both deterministic trajectories and random jumps at random times. In this paper, we state a new characterization of the jump rate…

Markov Chains with variable length are useful stochastic models for data compression that avoid the curse of dimensionality faced by that full Markov Chains. In this paper we introduce a Variable Length Markov Chain whose transition…

We consider continuous-time Markov chains on integers which allow transitions to adjacent states only, with alternating rates. We give explicit formulas for probability generating functions, and also for means, variances and state…