Related papers: Cointegrating Jumps: an Application to Energy Faci…
Inspired by a duration-dependent life insurance model, we consider continuous-time semi-Markov jump processes, initially assumed to have a finite state-space. We develop approximations using jump processes that are time-homogeneous Markov,…
This paper investigates the pricing of financial derivatives and the calculation of their delta Greek when the underlying asset is a jump-diffusion process in which the stochastic intensity component follows the CIR process. Utilizing…
The purpose of the paper is to present a new pricing method for clean spread options, and to illustrate its main features on a set of numerical examples produced by a dedicated computer code. The novelty of the approach is embedded in the…
In mathematical finance a popular approach for pricing options under some Levy model is to consider underlying that follows a Poisson jump diffusion process. As it is well known this results in a partial integro-differential equation (PIDE)…
The non-storability of electricity makes it unique among commodity assets, and it is an important driver of its price behaviour in secondary financial markets. The instantaneous and continuous matching of power supply with demand is a key…
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…
The problem of European-style option pricing in time-changed L\'{e}vy models in the presence of compound Poisson jumps is considered. These jumps relate to sudden large drops in stock prices induced by political or economical hits. As the…
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…
We present a detailed analysis and implementation of a splitting strategy to identify simultaneously the local-volatility surface and the jump-size distribution from quoted European prices. The underlying model consists of a jump-diffusion…
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 paper we consider a jump-diffusion dynamic whose parameters are driven by a continuous time and stationary Markov Chain on a finite state space as a model for the underlying of European contingent claims. For this class of processes…
We develop cointegration for multivariate continuous-time stochastic processes, both in finite and infinite dimension. Our definition and analysis are based on factor processes and operators mapping to the space of prices and cointegration.…
In this article, a compact finite difference method is proposed for pricing European and American options under jump-diffusion models. Partial integro-differential equation and linear complementary problem governing European and American…
We study existence of probability measure valued jump-diffusions described by martingale problems. We develop a simple device that allows us to embed Wasserstein spaces and other similar spaces of probability measures into locally compact…
We investigate the valuation of the bid and ask prices for European option under the mixed fractional Brownian motion environment in the presence of superimposed jumps by an independent Poisson process.
We analyze the thermodynamic structure of jump diffusions combining Brownian and Poisson noise, a class of stochastic dynamics relevant to nonequilibrium statistical physics. For such nonlocal dynamics, the free energy admits a full…
In this work we present an analytical model, based on the path-integral formalism of Statistical Mechanics, for pricing options using first-passage time problems involving both fixed and deterministically moving absorbing barriers under…
In the setting of polynomial jump-diffusion dynamics, we provide an explicit formula for computing correlators, namely, cross-moments of the process at different time points along its path. The formula appears as a linear combination of…
This paper is devoted to the price-storage dynamics in natural gas markets. A novel stochastic path-dependent volatility model is introduced with path-dependence in both price volatility and storage increments. Model calibrations are…
Polynomial jump-diffusions constitute a class of tractable stochastic models with wide applicability in areas such as mathematical finance and population genetics. We provide a full parameterization of polynomial jump-diffusions on the unit…