Related papers: Simulation of Implied Volatility Surfaces via Tang…
This paper studies pricing derivatives in an age-dependent semi-Markov modulated market. We consider a financial market where the asset price dynamics follow a regime switching geometric Brownian motion model in which the coefficients…
The robust option pricing problem is to find upper and lower bounds on fair prices of financial claims using only the most minimal assumptions. It contrasts with the classical, model-based approach and gained prominence in the wake of the…
We propose the use of statistical emulators for the purpose of valuing mortality-linked contracts in stochastic mortality models. Such models typically require (nested) evaluation of expected values of nonlinear functionals of…
This paper offers a new approach for estimating and forecasting the volatility of financial time series. No assumption is made about the parametric form of the processes. On the contrary, we only suppose that the volatility can be…
We treat implied volatility surface (IVS) reconstruction as a learning problem guided by two principles. First, we adopt a meta-learning view that trains across trading days to learn a procedure that maps sparse option quotes to a full IVS…
We propose sequential Monte Carlo based algorithms for maximum likelihood estimation of the static parameters in hidden Markov models with an intractable likelihood using ideas from approximate Bayesian computation. The static parameter…
We provide a model-free pricing-hedging duality in continuous time. For a frictionless market consisting of $d$ risky assets with continuous price trajectories, we show that the purely analytic problem of finding the minimal superhedging…
Purpose: This study introduces a novel framework for identifying and exploiting predictive lead-lag relationships in financial markets. We propose an integrated approach that combines advanced statistical methodologies with machine learning…
In this paper, we propose and study a novel continuous-time model, based on the well-known constant elasticity of variance (CEV) model, to describe the asset price process. The basic idea is that the volatility elasticity of the CEV model…
We analyze the empirical performance of several non-parametric estimators of the pricing functional for European options, using historical put and call prices on the S&P500 during the year 2012. Two main families of estimators are…
In this paper, we study the statistical properties of the moneyness scaling transformation by Leung and Sircar (2015). This transformation adjusts the moneyness coordinate of the implied volatility smile in an attempt to remove the…
The local volatility model is a widely used for pricing and hedging financial derivatives. While its main appeal is its capability of reproducing any given surface of observed option prices---it provides a perfect fit---the essential…
Albeit of crucial interest for both financial practitioners and researchers, market-implied volatility data of European swaptions often exhibit large portions of missing quotes due to illiquidity of the various underlying swaption…
In an era when derivatives is getting popular, risk management has gradually become the core content of modern finance. In order to study how to accurately estimate the volatility of the S&P 500 index, after introducing the theoretical…
We propose a general interpretation for long-range correlation effects in the activity and volatility of financial markets. This interpretation is based on the fact that the choice between `active' and `inactive' strategies is subordinated…
We introduce a class of randomly time-changed fast mean-reverting stochastic volatility models and, using spectral theory and singular perturbation techniques, we derive an approximation for the prices of European options in this setting.…
In this article, we tackle the problem of a market maker in charge of a book of options on a single liquid underlying asset. By using an approximation of the portfolio in terms of its vega, we show that the seemingly high-dimensional…
We develop a new stock market index that captures the chaos existing in the market by measuring the mutual changes of asset prices. This new index relies on a tensor-based embedding of the stock market information, which in turn frees it…
In informationally efficient financial markets, option prices and this implied volatility should immediately be adjusted to new information that arrives along with a jump in underlying's return, whereas gradual changes in implied volatility…
We consider an investor who seeks to maximize her expected utility derived from her terminal wealth relative to the maximum performance achieved over a fixed time horizon, and under a portfolio drawdown constraint, in a market with local…