Related papers: A One-Factor Conditionally Linear Commodity Pricin…
A new framework for asset price dynamics is introduced in which the concept of noisy information about future cash flows is used to derive the price processes. In this framework an asset is defined by its cash-flow structure. Each cash flow…
We propose a strategy for automated trading, outline theoretical justification of the profitability of this strategy and overview the hypothetical results in application to currency pairs trading. The proposed methodology relies on the…
We consider a reflected Ornstein-Uhlenbeck process $X$ driven by a fractional Brownian motion with Hurst parameter $H\in (0, \frac12) \cup (\frac12, 1)$. Our goal is to estimate an unknown drift parameter $\alpha\in (-\infty,\infty)$ on the…
This paper builds Wasserstein ambiguity sets for the unknown probability distribution of dynamic random variables leveraging noisy partial-state observations. The constructed ambiguity sets contain the true distribution of the data with…
Bayesian predictive inference propagates parameter uncertainty to quantities of interest through the posterior-predictive distribution. In practice, this is typically performed using a two-stage procedure: first approximating the posterior…
We propose a general framework of European power option pricing under two different market assumptions about extended Vasic\v{e}k interest rate process and exponential Ornstein-Uhlenbeck asset process with continuous dividend as underlying,…
This paper explores the nonparametric estimation of the volatility component in a heteroscedastic scalar-on-function regression model, where the underlying discrete-time process is ergodic and subject to a missing-at-random mechanism. We…
The Ornstein-Uhlenbeck process can be seen as a paradigm of a finite-variance and statistically stationary rough random walk. Furthermore, it is defined as the unique solution of a Markovian stochastic dynamics and shares the same local…
Consider a periodic, mean-reverting Ornstein-Uhlenbeck process $X=\{X_t,t\geq0\}$ of the form $d X_{t}=\left(L(t)+\alpha X_{t}\right) d t+ dB^H_{t}, \quad t \geq 0$, where $L(t)=\sum_{i=1}^{p}\mu_i\phi_i (t)$ is a periodic parametric…
We investigate a pricing rule that is applicable for streams of income or contingent claim liabilities and study how this rule changes under additional insider-type information that an investor might obtain. Considering a model where the…
This paper presents an overview of information-based asset pricing. In this approach, an asset is defined by its cash-flow structure. The market is assumed to have access to "partial" information about future cash flows. Each cash flow is…
In this study, we consider the asset pricing under model uncertainty with discrete time and states structure. For the single-period securities model, we give a novel definition of arbitrage under a family of probability, and explore of its…
This paper studies the question of filtering and maximizing terminal wealth from expected utility in a partially information stochastic volatility models. The special features is that the only information available to the investor is the…
Finding Bertram's optimal trading strategy for a pair of cointegrated assets following the Ornstein--Uhlenbeck price difference process can be formulated as an unconstrained convex optimization problem for maximization of expected profit…
This paper addresses the estimation problem of an unknown drift parameter matrix for a fractional Ornstein-Uhlenbeck process in a multi-dimensional setting. To tackle this problem, we propose a novel approach based on rough path theory that…
When stock prices are observed at high frequencies, more information can be utilized in estimation of parameters of the price process. However, high-frequency data are contaminated by the market microstructure noise which causes significant…
In the present paper we consider the Ornstein-Uhlenbeck process of the second kind defined as solution to the equation $dX_{t} = -\alpha X_{t}dt+dY_{t}^{(1)}, \ \ X_{0}=0$, where $Y_{t}^{(1)}:=\int_{0}^{t}e^{-s}dB^H_{a_{s}}$ with…
We first study the drift parameter estimation of the fractional Ornstein-Uhlenbeck process (fOU) with periodic mean for every $\frac{1}{2}<H<1$. More precisely, we extend the consistency proved in \cite{DFW} for $\frac{1}{2}<H<\frac{3}{4}$…
For a commodity spot price dynamics given by an Ornstein-Uhlenbeck process with Barndorff-Nielsen and Shephard stochastic volatility, we price forwards using a class of pricing measures that simultaneously allow for change of level and…
Classical solvable stochastic volatility models (SVM) use a CEV process for instantaneous variance where the CEV parameter $\gamma$ takes just few values: 0 - the Ornstein-Uhlenbeck process, 1/2 - the Heston (or square root) process, 1-…