Related papers: Dirac Processes and Default Risk
Using a Levy process we generalize formulas in Bo et al.(2010) for the Esscher transform parameters for the log-normal distribution which ensure the martingale condition holds for the discounted foreign exchange rate. Using these values of…
In this paper, we consider the pricing of derivative products that involve dynamic hedging strategies and payments within the planning horizon. Equity-indexed annuities (EIAs), Guaranteed investment certificate (GIC), American and Barrier…
eCommerce transaction frauds keep changing rapidly. This is the major issue that prevents eCommerce merchants having a robust machine learning model for fraudulent transactions detection. The root cause of this problem is that rapid…
We derive new all-purpose methods that involve the Dirac Delta distribution. Some of the new methods use derivatives in the argument of the Dirac Delta. We highlight potential avenues for applications to quantum field theory and we also…
Realised pay-offs for discretisation-invariant swaps are those which satisfy a restricted `aggregation property' of Neuberger [2012] for twice continuously differentiable deterministic functions of a multivariate martingale. They are…
The inclusion of DVA in the fair-value of derivative transactions has now become standard accounting practice in most parts of the world. Furthermore, some sophisticated banks are including an FVA (Funding Valuation Adjustment), but since…
This paper models stochastic process of price time series of CSI 300 index in Chinese financial market, analyzes volatility characteristics of intraday high-frequency price data. In the new generalized Barndorff-Nielsen and Shephard model,…
By capturing outliers, volatility clustering, and tail dependence in the asset return distribution, we build a sophisticated model to predict the downside risk of the global financial market. We further develop a dynamic regime switching…
With the reform of interest rate benchmarks, interbank offered rates (IBORs) like LIBOR have been replaced by risk-free rates (RFRs), such as the Secured Overnight Financing Rate (SOFR) in the U.S. and the Euro Short-Term Rate (\euro STR)…
This paper is an investigation of the class of real classical Markov processes without a birth process that will generate the Dirac equation in 1+1 dimensions. The Markov process is assumed to evolve in an extra (ordinal) time dimension.…
We propose a novel credit default model that takes into account the impact of macroeconomic information and contagion effect on the defaults of obligors. We use a set-valued Markov chain to model the default process, which is the set of all…
In this paper, we consider a one-dimensional diffusion process with jumps driven by a Hawkes process. We are interested in the estimations of the volatility function and of the jump function from discrete high-frequency observations in a…
A new multi-factor short rate model is presented which is bounded from below by a real-valued function of time. The mean-reverting short rate process is modeled by a sum of pure-jump Ornstein--Uhlenbeck processes such that the related bond…
Fractional Dirac materials (FDMs) feature a fractional energy-momentum relation $E(\vec{k}) \sim |\vec{k}|^{\alpha}$, where $\alpha \; (<1)$ is a real noninteger number, in contrast to that in conventional Dirac materials with $\alpha=1$.…
We propose a method for extending a given asset pricing formula to account for two additional sources of risk: the risk associated with future changes in market--calibrated parameters and the remaining risk associated with idiosyncratic…
The latest generation of volatility derivatives goes beyond variance and volatility swaps and probes our ability to price realized variance and sojourn times along bridges for the underlying stock price process. In this paper, we give an…
We propose a model of fractal point process driven by the nonlinear stochastic differential equation. The model is adjusted to the empirical data of trading activity in financial markets. This reproduces the probability distribution…
Several models of stock trading [P. Bak et al, Physica A {\bf 246}, 430 (1997)] are analyzed in analogy with one-dimensional, two-species reaction-diffusion-branching processes. Using heuristic and scaling arguments, we show that the…
We propose a dynamical model for the estimation of Operational Risk in banking institutions. Operational Risk is the risk that a financial loss occurs as the result of failed processes. Examples of operational losses are the ones generated…
Dunkl processes are multidimensional Markov processes defined through the use of Dunkl operators. These processes have discontinuities, and they can be separated into their continuous (radial) part, and their discontinuous (jump) part.…