Related papers: A Market Model for VIX Futures
Mandatory emission trading schemes are being established around the world. Participants of such market schemes are always exposed to risks. This leads to the creation of an accompanying market for emission-linked derivatives. To evaluate…
In this article we present a continuous time model for natural gas and crude oil future prices. Its main feature is the possibility to link both energies in the long term and in the short term. For each energy, the future returns are…
Following closely the construction of the Schrodinger bridge, we build a new class of Stochastic Volatility Models exactly calibrated to market instruments such as for example Vanillas, options on realized variance or VIX options. These…
In this paper we study the evolution of asset price bubbles driven by contagion effects spreading among investors via a random matching mechanism in a discrete-time version of the liquidity based model of [25]. To this scope, we extend the…
This short note provides a systematic construction of market models without unbounded profits but with arbitrage opportunities.
We investigate constrained optimal control problems for linear stochastic dynamical systems evolving in discrete time. We consider minimization of an expected value cost over a finite horizon. Hard constraints are introduced first, and then…
The estimation of asset return distributions is crucial for determining optimal trading strategies. In this paper we describe the constrained mixture model, based on a mixture of Gamma and Gaussian distributions, to provide an accurate…
We present an algorithm for robust model predictive control with consideration of uncertainty and safety constraints. Our framework considers a nonlinear dynamical system subject to disturbances from an unknown but bounded uncertainty set.…
This article presents a generic framework for modeling the dynamics of forward curves in commodity market as commodity derivatives are typically traded by futures or forwards. We have theoretically demonstrated that commodity prices are…
A first attempt at obtaining market--directional information from a non--stationary solution of the dynamic equation "future price tends to the value that maximizes the number of shares traded per unit time" [1] is presented. We demonstrate…
We present a stochastic local volatility model for derivative contracts on commodity futures. The aim of the model is to be able to recover the prices of derivative claims both on futures contracts and on indices on futures strategies.…
This paper presents a strictly convex chance-constrained stochastic control framework that accounts for uncertainty in control specifications such as reference trajectories and operational constraints. By jointly optimizing control inputs…
This paper proposes to model asset price dynamics with a mixture of diffusion processes where the instantaneous volatility of the underlying diffusion process contains a random vector. The marginal probability distributions of the proposed…
Trading a financial asset pushes its price as well as the prices of other assets, a phenomenon known as cross-impact. The empirical estimation of this effect on complex financial instruments, such as derivatives, is an open problem. To…
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…
We study the optimal portfolio liquidation problem over a finite horizon in a limit order book with bid-ask spread and temporary market price impact penalizing speedy execution trades. We use a continuous-time modeling framework, but in…
In this article we propose a study of market models starting from a set of axioms, as one does in the case of risk measures. We define a market model simply as a mapping from the set of adapted strategies to the set of random variables…
In this paper we show how to approximate a Heath-Jarrow-Morton dynamics for the forward prices in commodity markets with arbitrage-free models which have a finite dimensional state space. Moreover, we recover a closed form representation of…
We consider the joint SPX-VIX calibration within a general class of Gaussian polynomial volatility models in which the volatility of the SPX is assumed to be a polynomial function of a Gaussian Volterra process defined as a stochastic…
The Chicago Board Options Exchange Volatility Index (VIX) is calculated from SPX options and derivatives of VIX are also traded in market, which leads to the so-called ``consistent modeling" problem. This paper proposes a time-changed…