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We propose to model multivariate volatility processes based on the newly defined conditionally uncorrelated components (CUCs). This model represents a parsimonious representation for matrix-valued processes. It is flexible in the sense that…
The paper studies pricing of insurance products focusing on the pricing of annuities under uncertainty. This pricing problem is crucial for financial decision making and was studied intensively, however, many open questions still remain. In…
We develop a model to price inflation and interest rates derivatives using continuous-time dynamics that have some links with macroeconomic monetary DSGE models equipped with a Taylor rule: in particular, the reaction function of the…
What is the demand elasticity of statistical arbitrageurs that invest according to the advice of modern cross-sectional asset pricing models? Thirteen models from the literature exhibit strikingly inelastic demand, in contrast to classical…
We study a market model in which the volatility of the stock may jump at a random time from a fixed value to another fixed value. This model was already described in the literature. We present a new approach to the problem, based on partial…
We introduce a non-Markovian model for electricity markets where the spot price of electricity is driven by several Gaussian Volterra processes, which can be e.g., fractional Brownian motions (fBms), Riemann-Liouville processes or…
This paper addresses a critical inconsistency in models of the term structure of interest rates (TSIR), where zero-coupon bonds are priced under risk-neutral measures distinct from those used in equity markets. We propose a unified TSIR…
This paper provides evidence that stock returns, after truncation, might be modeled by a special type of continuous mixtures or normals, so-called $q$-Gaussians. Negative binomial distributions might model the counts for extreme returns. A…
The stability of the inflation rate is a necessary condition for the proper functioning of any capitalist economy. In an economic environment with volatile inflation, the growth of the economy and its distribution among the agents of…
Using neural networks, we compute bounds on the prices of multi-asset derivatives given information on prices of related payoffs. As a main example, we focus on European basket options and include information on the prices of other similar…
We aim to construct a general framework for portfolio management in continuous time, encompassing both stocks and bonds. In these lecture notes we give an overview of the state of the art of optimal bond portfolios and we re-visit main…
In Financial Signal Processing, multiple time series such as financial indicators, stock prices and exchange rates are strongly coupled due to their dependence on the latent state of the market and therefore they are required to be jointly…
We consider a class of participation rights, i.e. obligations issued by a company to investors who are interested in performance-based compensation. Albeit having desirable economic properties equity-based debt obligations (EbDO) pose…
We consider a dynamic market model of liquidity where unmatched buy and sell limit orders are stored in order books. The resulting net demand surface constitutes the sole input to the model. We prove that generically there is no arbitrage…
We show how inter-asset dependence information derived from market prices of options can lead to improved model-free price bounds for multi-asset derivatives. Depending on the type of the traded option, we either extract correlation…
We study the valuation and hedging problem of European options in a market subject to liquidity shocks. Working within a Markovian regime-switching setting, we model illiquidity as the inability to trade. To isolate the impact of such…
There are essentially three kinds of approaches to Uncertainty Quantification (UQ): (A) robust optimization, (B) Bayesian, (C) decision theory. Although (A) is robust, it is unfavorable with respect to accuracy and data assimilation. (B)…
The over-the-counter (OTC) government bond markets are characterised by their bilateral trading structures, which pose unique challenges to understanding and ensuring market stability and liquidity. In this paper, we develop a bespoke ABM…
A noncommutative version of the usual electro-weak theory is constructed. We discuss how to overcome the two major problems: 1) although we can have noncommutative U(n) (which we denote by $U_{\star}(n)$) gauge theory we cannot have…
The multidimensional Uncertain Volatility Model leads to robust option pricing problems under joint volatility and correlation uncertainty. Their numerical resolution quickly becomes challenging because the associated stochastic control…