Related papers: Coping with Negative Short-Rates
We consider a continuous-time financial market with an asset whose price is modeled by a linear stochastic differential equation with drift and volatility switching driven by a uniformly ergodic jump Markov process with a countable state…
This paper considers general term structure models like the ones appearing in portfolio credit risk modelling or life insurance. We give a general model starting from families of forward rates driven by infinitely many Brownian motions and…
The analysis of the intraday dynamics of correlations among high-frequency returns is challenging due to the presence of asynchronous trading and market microstructure noise. Both effects may lead to significant data reduction and may…
We derive an equation of motion for interest-rate yield curves by applying a minimum Fisher information variational approach to the implied probability density. By construction, solutions to the equation of motion recover observed bond…
We develop at-the-money call-price and implied volatility asymptotic expansions in time to maturity for a class of asset-price models whose log returns follow a L\'evy process. Under mild assumptions placing the driving L\'evy process in…
In sequential change detection, existing performance measures differ significantly in the way they treat the time of change. By modeling this quantity as a random time, we introduce a general framework capable of capturing and better…
We study the problem of dynamically trading a futures contract and its underlying asset under a stochastic basis model. The basis evolution is modeled by a stopped scaled Brownian bridge to account for non-convergence of the basis at…
Trend and Value are pervasive anomalies, common to all financial markets. We address the problem of their co-existence and interaction within the framework of Heterogeneous Agent Based Models (HABM). More specifically, we extend the…
Non-stationarity poses significant challenges for multivariate time series forecasting due to the inherent short-term fluctuations and long-term trends that can lead to spurious regressions or obscure essential long-term relationships. Most…
Time-dependent Hamiltonian dynamics is derived for a curve (molecular strand) in $\mathbb{R}^3$ that experiences both nonlocal (for example, electrostatic) and elastic interactions. The dynamical equations in the symmetry-reduced variables…
We consider a stochastic volatility model with jumps where the underlying asset price is driven by the process sum of a 2-dimensional Brownian motion and a 2-dimensional compensated Poisson process. The market is incomplete, resulting in…
We formulate and solve a variant of the quickest detection problem which features false negatives. A standard Brownian motion acquires a drift at an independent exponential random time which is not directly observable. Based on the…
Consider discrete time observations (X_{\ell\delta})_{1\leq \ell \leq n+1}$ of the process $X$ satisfying $dX_t= \sqrt{V_t} dB_t$, with $V_t$ a one-dimensional positive diffusion process independent of the Brownian motion $B$. For both the…
Robust yield curve estimation is crucial in fixed-income markets for accurate instrument pricing, effective risk management, and informed trading strategies. Traditional approaches, including the bootstrapping method and parametric…
We study a financial market where the risky asset is modelled by a geometric It\^o-L\'{e}vy process, with a singular drift term. This can for example model a situation where the asset price is partially controlled by a company which…
We develop a model for the dynamic evolution of default-free and defaultable interest rates in a LIBOR framework. Utilizing the class of affine processes, this model produces positive LIBOR rates and spreads, while the dynamics are…
We present a simple hybrid dynamical model as a tool to investigate behavioral strategies based on trend following. The multiplicative symbolic dynamics are generated using a lognormal diffusion model for the at-the-money implied volatility…
In this paper we provide a comprehensive analysis of a structural model for the dynamics of prices of assets traded in a market originally proposed in [1]. The model takes the form of an interacting generalization of the geometric Brownian…
In quantitative finance, we often model asset prices as a noisy Ito semimartingale. As this model is not identifiable, approximating by a time-changed Levy process can be useful for generative modelling. We give a new estimate of the…
While logistic regression models are easily accessible to researchers, when applied to network data there are unrealistic assumptions made about the dependence structure of the data. For temporal networks measured in discrete time, recent…