Related papers: Sensitivity analysis in a market with memory
The aim of this work is to introduce a new stochastic volatility model for equity derivatives. To overcome some of the well-known problems of the Heston model, and more generally of the affine models, we define a new specification for the…
Purpose: Trading on electricity markets occurs such that the price settlement takes place before delivery, often day-ahead. In practice, these prices are highly volatile as they largely depend upon a range of variables such as electricity…
The collateral choice option allows a collateral-posting party the opportunity to change the type of security in which the collateral is deposited. Due to non-zero collateral basis spreads, this optionality significantly impacts asset…
This paper is devoted to the price-storage dynamics in natural gas markets. A novel stochastic path-dependent volatility model is introduced with path-dependence in both price volatility and storage increments. Model calibrations are…
We consider the supOU stochastic volatility model which is able to exhibit long-range dependence. For this model we give conditions for the discounted stock price to be a martingale, calculate the characteristic function, give a strip where…
This paper deals with the problem of discrete-time option pricing by the mixed fractional version of Merton model with transaction costs. By a mean-self-financing delta hedging argument in a discrete-time setting, a European call option…
Prediction markets are designed to elicit information from multiple agents in order to predict (obtain probabilities for) future events. A good prediction market incentivizes agents to reveal their information truthfully; such incentive…
We consider the randomness of market trade as the origin of price and return stochasticity. We look at time series of trade values and volumes as random variables during the averaging interval {\Delta} and describe the dependences of…
In this article, a sensitivity analysis of long-term cash flows with respect to perturbations in the underlying process is presented. For this purpose, we employ the martingale extraction through which a pricing operator is transformed into…
Traditional electric energy markets do not explicitly model generator contingencies. To improve the representation of resources and to enhance the modeling of uncertainty, existing markets are moving in the direction of including generator…
This paper focuses on price-based residential demand response implemented through dynamic adjustments of electricity prices during DR events. It extends existing DR models to a stochastic framework in which customer response is represented…
We present a nonlinear stochastic differential equation (SDE) which mimics the probability density function (PDF) of the return and the power spectrum of the absolute return in financial markets. Absolute return as a measure of market…
This work introduces the use of multivariate global sensitivity analysis for assessing the impact of uncertain electric machine design parameters on efficiency maps and profiles. Contrary to the common approach of applying variance-based…
One stylized feature of financial volatility impacting the modeling process is long memory. This paper examines long memory for alternative risk measures, observed absolute and squared returns for Daily REITs and compares the findings for a…
We consider the optimal investment and marginal utility pricing problem of a risk averse agent and quantify their exposure to a small amount of model uncertainty. Specifically, we compute explicitly the first-order sensitivity of their…
We develop a theoretical framework that aims to link micro-level option hedging and stock-specific factor exposure with macro-level market turbulence and explain endogenous volatility amplification during gamma-squeeze events. By explicitly…
Based on the existing literature, this article presents the different ways of choosing the parameters of stochastic volatility models in general, in the context of pricing financial derivative contracts. This includes the use of stochastic…
This paper discusses the sensitivity of the long-term expected utility of optimal portfolios for an investor with constant relative risk aversion. Under an incomplete market given by a factor model, we consider the utility maximization…
The storage and retrieval of photonic quantum states, quantum memory, is a key resource for a wide range of quantum applications. Here we investigate the sensitivity of $\Lambda$-type quantum memory to experimental fluctuations and drift.…
We employ a 2x3 factorial experiment to study two central factors in the design of prediction markets (PMs) for idea evaluation: the overall design of the PM, and the elasticity of market prices set by a market maker. The results show that…