Related papers: Black-Scholes in a CEV random environment

We consider uncorrelated Stein-Stein, Heston, and Hull-White models and their perturbations by compound Poisson processes with jump amplitudes distributed according to a double exponential law. Similar perturbations of the Black-Scholes…

This paper provides a first attempt to incorporate the massive discontinuous changes in the spatio-temporal dynamics of epidemics. Namely, we propose an extended class of epidemic models, governed by coupled stochastic semilinear partial…

In financial mathematics, it is a typical approach to approximate financial markets operating in discrete time by continuous-time models such as the Black Scholes model. Fitting this model gives rise to difficulties due to the discrete…

We analyze a specific class of random systems that are driven by a symmetric L\'{e}vy stable noise. In view of the L\'{e}vy noise sensitivity to the confining "potential landscape" where jumps take place (in other words, to environmental…

In Figueroa-L\'opez et al. (2013), a second order approximation for at-the-money (ATM) option prices is derived for a large class of exponential L\'evy models, with or without a Brownian component. The purpose of this article is twofold.…

Statistical inference for stochastic processes based on high-frequency observations has been an active research area for more than a decade. One of the most well-known and widely studied problems is that of estimation of the quadratic…

Pricing of high-dimensional options is one of the most important problems in Mathematical Finance. The objective of this manuscript is to present an original self-contained treatment of the multidimensional pricing. During the past decades…

The rampant phenomenon of overpopulation and the remarkable increase of human movements over the last decade have caused an aggressive re-emergence of dengue fever, which made it the subject of several research fields. In this regard,…

In this work, we investigate positive recurrent L\'evy diffusions driven by appropriately scaled Brownian motion and $\alpha$-stable process (with $1<\alpha<2$) in the small noise regime. Supposing that in the vanishing noise limit, our…

This note develops a stochastic model of asset volatility. The volatility obeys a continuous-time autoregressive equation. Conditions under which the process is asymptotically stationary and possesses long memory are characterised.…

We provide an European option pricing formula written in the form of an infinite series of Black Scholes type terms under double Levy jumps model, where both the interest rate and underlying price are driven by Levy process. The series…

The paper proposes an expanded version of the Local Variance Gamma model of Carr and Nadtochiy by adding drift to the governing underlying process. Still in this new model it is possible to derive an ordinary differential equation for the…

Using Malliavin Calculus techniques, we derive closed-form expressions for the at-the-money behaviour of the forward implied volatility, its skew and its curvature, in general Markovian stochastic volatility models with continuous paths.

Accurately characterizing the implied volatility curves is a central challenge in option pricing and risk management. The classical SABR model by Hagan et al. has been widely adopted in practice due to its well-defined stochastic volatility…

Recently, emerging epidemics like COVID-19 and its variants require predictive mathematical models to implement suitable responses in order to limit their negative and profound impact on society. The SIR (Susceptible-InfectedRemoved) system…

We consider rough stochastic volatility models where the variance process satisfies a stochastic Volterra equation with the fractional kernel, as in the rough Bergomi and the rough Heston model. In particular, the variance process is…

This paper demonstrates the efficiency of using Edgeworth and Gram-Charlier expansions in the calibration of the Libor Market Model with Stochastic Volatility and Displaced Diffusion (DD-SV-LMM). Our approach brings together two research…

Jump diffusion processes are widely used to model asset prices over time, mainly for their ability to capture complex discontinuous behavior, but inference on the model parameters remains a challenge. Here our goal is posterior inference on…

The Black-Scholes model gives vanilla Europen call option prices as a function of the volatility. We prove Lipschitz stability in the inverse problem of determining the implied volatility, which is a function of the underlying asset, from a…

In this paper we introduce a new class of state space models based on shot-noise simulation representations of non-Gaussian L\'evy-driven linear systems, represented as stochastic differential equations. In particular a conditionally…