Related papers: Smile with the Gaussian term structure model
Studying conditional independence among many variables with few observations is a challenging task. Gaussian Graphical Models (GGMs) tackle this problem by encouraging sparsity in the precision matrix through $l_q$ regularization with…
To make medium- and long-term insurance products attractive, it is essential to enable participation in stock market returns. However, to eliminate downside risk, guarantees must be included, which naturally leads to the challenge of…
Stochastic processes are a flexible and widely used family of models for statistical modeling. While stochastic processes offer attractive properties such as inclusion of uncertainty properties, their inference is typically intractable,…
The logarithmic model offers new tools for image processing. An efficient method for image enhancement is to use an affine transformation with the logarithmic operations: addition and scalar multiplication. We define some criteria for…
We introduce a perturbative formalism to solve the backward-looking futures pricing problem. The formalism is based on a time-ordered exponential series which allows to derive the functional form of the integral kernel associated to the…
We present a novel approach for explaining Gaussian processes (GPs) that can utilize the full analytical covariance structure present in GPs. Our method is based on the popular solution concept of Shapley values extended to stochastic…
We propose a dynamic factor model (DFM) where the latent factors are linked to observed variables with unknown and potentially nonlinear functions. The key novelty and source of flexibility of our approach is a nonparametric observation…
We develop a method to study the implied volatility for exotic options and volatility derivatives with European payoffs such as VIX options. Our approach, based on Malliavin calculus techniques, allows us to describe the properties of the…
In this paper, we introduce a new time series model having a stochastic exponential tail. This model is constructed based on the Normal Tempered Stable distribution with a time-varying parameter. The model captures the stochastic…
This paper introduces a novel method for open-vocabulary 3D scene querying in autonomous driving by combining Language Embedded 3D Gaussians with Large Language Models (LLMs). We propose utilizing LLMs to generate both contextually…
We introduce Latent Vector Grammars (LVeGs), a new framework that extends latent variable grammars such that each nonterminal symbol is associated with a continuous vector space representing the set of (infinitely many) subtypes of the…
We present an image representation method which is derived from analyzing Gaussian probability density function (\emph{pdf}) space using Lie group theory. In our proposed method, images are modeled by Gaussian mixture models (GMMs) which…
We study in details the skew of stock option smiles, which is induced by the so-called leverage effect on the underlying -- i.e. the correlation between past returns and future square returns. This naturally explains the anomalous…
We present a flexible approach for the valuation of interest rate derivatives based on Affine Processes. We extend the methodology proposed in Keller-Ressel et al. (2009) by changing the choice of the state space. We provide…
Consider a random vector with finite second moments. If its precision matrix is an M-matrix, then all partial correlations are non-negative. If that random vector is additionally Gaussian, the corresponding Markov random field (GMRF) is…
Gaussian mixture models (GMMs) are ubiquitous in statistical learning, particularly for unsupervised problems. While full GMMs suffer from the overparameterization of their covariance matrices in high-dimensional spaces, spherical GMMs…
In some options markets (e.g. commodities), options are listed with only a single maturity for each underlying. In others, (e.g. equities, currencies), options are listed with multiple maturities. In this paper, we provide an algorithm for…
This paper introduces the Gaussian multi-Graphical Model, a model to construct sparse graph representations of matrix- and tensor-variate data. We generalize prior work in this area by simultaneously learning this representation across…
The rBergomi model under the physical measure consists of modeling the log-variance as a truncated Brownian semi-stationary process. Then, a deterministic change of measure is applied. The rBergomi model is able to reproduce observed market…
It is known that Heston's stochastic volatility model exhibits moment explosion, and that the critical moment $s_+$ can be obtained by solving (numerically) a simple equation. This yields a leading order expansion for the implied volatility…