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In this paper we discuss a closed-form approximation of the likelihood functions of an arbitrary diffusion process. The approximation is based on an exponential ansatz of the transition probability for a finite time step $\Delta t$, and a…
We study the convergence properties of the short maturity expansion of option prices in the uncorrelated log-normal ($\beta=1$) SABR model. In this model the option time-value can be represented as an integral of the form $V(T) =…
This paper obtains an asymptotic formula for the finite-time ruin probability of the compound nonhomogeneous Poisson risk model with a constant interest force, in which the claims are conditionally independent random variables with a common…
We introduce a first theory of price impact in presence of an interest-rates term structure. We explain how one can formulate instantaneous and transient price impact on bonds with different maturities, including a cross price impact that…
Using classical Taylor series techniques, we develop a unified approach to pricing and implied volatility for European-style options in a general local-stochastic volatility setting. Our price approximations require only a normal CDF and…
We derive in the closed and unimprovable form the bilateral non-asymptotic relations between growth of entire functions and decay rate at infinity of its Taylor coefficients. We investigate the functions of one as well as of several complex…
We develop cointegration for multivariate continuous-time stochastic processes, both in finite and infinite dimension. Our definition and analysis are based on factor processes and operators mapping to the space of prices and cointegration.…
We propose a continuous time model for financial markets with proportional transactions costs and a continuum of risky assets. This is motivated by bond markets in which the continuum of assets corresponds to the continuum of possible…
Real data are constrained to finite sampling rates, which calls for a suitable mathematical description of the corrections to the finite-time estimations of the dynamic equations. Often in the literature, lower order discrete time…
In this paper, we investigate the optimal strong convergence rate of numerical approximations for the Cox--Ingersoll--Ross model driven by fractional Brownian motion with Hurst parameter $H\in(1/2,1)$. To deal with the difficulties caused…
We revise the $b_*$ model for the Collins-Soper-Sterman resummed form factor to improve description of the leading-power contribution at nearly nonperturbative impact parameters. This revision leads to excellent agreement of the transverse…
We present compelling empirical evidence for a new interpretation of the Forward Rate Curve (FRC) term structure. We find that the average FRC follows a square-root law, with a prefactor related to the spot volatility, suggesting a…
The problem of existence of solution for the Heath-Jarrow-Morton equation with linear volatility and purely jump random factor is studied. Sufficient conditions for existence and non-existence of the solution in the class of bounded fields…
In the present paper, a decomposition formula for the call price due to Al\`{o}s is transformed into a Taylor type formula containing an infinite series with stochastic terms. The new decomposition may be considered as an alternative to the…
In this paper, we study two variations of the time discrete Taylor schemes for rough differential equations and for stochastic differential equations driven by fractional Brownian motions. One is the incomplete Taylor scheme which excludes…
We consider a market with a term structure of credit risky bonds in the single-name case. We aim at minimal assumptions extending existing results in this direction: first, the random field of forward rates is driven by a general…
In this work, I generalize Merton's approach of pricing risky debt to the case where the interest rate risk is modeled by the CIR term structure. Closed form result for pricing the debt is given for the case where the firm value has…
This study is motivated by empirical observations of periodic fluctuations in interest rates, notably long-term economic cycles spanning decades, which the conventional Hull-White short-rate model fails to adequately capture. To address…
In 'A Closed-Form Solution for Options with Stochastic Volatility with Applications to Bond and Currency Options', Heston proposes a Stochastic Volatility (SV) model with constant interest rate and derives a semi-explicit valuation formula.…
We discuss the identification of a time-dependent potential in a time-fractional diffusion model from a boundary measurement taken at a single point. Theoretically, we establish a conditional Lipschitz stability for this inverse problem.…