Related papers: Dirac Processes and Default Risk
The proposed model modifies option pricing formulas for the basic case of log-normal probability distribution providing correspondence to formulated criteria of efficiency and completeness. The model is self-calibrating by historic…
In these notes, we present an alternative version of discrete Dirac mechanics using Dirac structures. We first establish a notion of 'continuous Dirac system' and then propose a definition of discrete Dirac system, proving that it is…
We report an implementation for employing the algebraic diagrammatic construction to second order [ADC(2)] ab initio electronic structure level of theory in nonadiabatic dynamics simulations in the framework of the SHARC (surface hopping…
Adaptive importance sampling techniques are widely known for the Gaussian setting of Brownian driven diffusions. In this work, we want to extend them to jump processes. Our approach relies on a change of the jump intensity combined with the…
This paper examines the problem of pricing spread options under some models with jumps driven by Compound Poisson Processes and stochastic volatilities in the form of Cox-Ingersoll-Ross(CIR) processes. We derive the characteristic function…
Credit Value Adjustment (CVA) is the difference between the value of the default-free and credit-risky derivative portfolio, which can be regarded as the cost of the credit hedge. Default probabilities are therefore needed, as input…
We investigate the performance of dynamic portfolios constructed using more than 21,000 technical trading rules on 12 categorical and country-specific markets over the 2004-2015 study period, on rolling forward structures of different…
In this paper, our focus lies on the Merton's jump diffusion model, employing jump processes characterized by the compound Poisson process. Our primary objective is to forecast the drift and volatility of the model using a variety of…
Systemic risk is a rapidly developing area of research. Classical financial models often do not adequately reflect the phenomena of bubbles, crises, and transitions between them during credit cycles. To study very improbable events,…
We study the pricing of derivative securities in financial markets modeled by a sub-mixed fractional Brownian motion with jumps (smfBm-J), a non-Markovian process that captures both long-range dependence and jump discontinuities. Under this…
In this paper we consider two processes driven by diffusions and jumps. The jump components are Levy processes and they can both have finite activity and infinite activity. Given discrete observations we estimate the covariation between the…
A generalization of the standard model of Dirac particle in external electromagnetic field is proposed. In the generalization we take into account interactions of this particle with environment, which is described by the memory function.…
The authors present a method of indicator random processes, applicable to constructing models of jump processes associated with diffusion process. Indicator random processes are processes that take only two values: 1 and 0, in accordance…
The Dirac exchange interaction is derived from recent quantum kinetic theory for collisionless plasmas. For this purpose, the kinetic equation is written in the semiclassical and long wavelength approximations. The validity of the model for…
The fundamental theorem behind financial markets is that stock prices are intrinsically complex and stochastic. One of the complexities is the volatility associated with stock prices. Volatility is a tendency for prices to change…
The aim of this work is to provide fast and accurate approximation schemes for the Monte Carlo pricing of derivatives in LIBOR market models. Standard methods can be applied to solve the stochastic differential equations of the successive…
In this paper, we relax the power parameter of instantaneous variance and develop a new stochastic volatility plus jumps model that generalize the Heston model and 3/2 model as special cases. This model has two distinctive features. First,…
We derived similar to Bo et al. (2010) results but in the case when the dynamics of the FX rate is driven by a general Merton jump-diffusion process. The main results of our paper are as follows: 1) formulas for the Esscher transform…
Using simple particle models of limit order markets, we argue that mid-term over-diffusive price behaviour is inherent to the very nature of these markets. Several rules for rate changes are considered. We obtain analytical results for…
In this paper we propose a novel pricing-hedging framework for volatility derivatives which simultaneously takes into account rough volatility and volatility jumps. Our model directly targets the instantaneous variance of a risky asset and…