Related papers: Sensitivity Analysis of Long-Term Cash Flows
In this article, we investigate the behavior of long-term options. In many cases, option prices follow an exponential decay (or growth) rate for further maturity dates. We determine under what conditions option prices are characterized by…
This paper investigates the large-time asymptotic behavior of the sensitivities of cash flows. In quantitative finance, the price of a cash flow is expressed in terms of a pricing operator of a Markov diffusion process. We study the extent…
We study cash-flow forecasting for derivatives used in liquidity management and clarify its relation to risk-neutral valuation and replication. While it is well known that expectations under different measures (e.g., $\mathbb{P}$ vs.…
Recent empirical studies suggest that the volatility of an underlying price process may have correlations that decay slowly under certain market conditions. In this paper, the volatility is modeled as a stationary process with long-range…
In this paper, we focus on the estimation of historical volatility of asset prices from high-frequency data. Stochastic volatility models pose a major statistical challenge: since in reality historical volatility is not observable, its…
Sensitivity analysis is concerned with understanding how the model output depends on uncertainties (variances) in inputs and then identifies which inputs are important in contributing to the prediction imprecision. Uncertainty determination…
We study the sensitivity of the expected utility maximization problem in a continuous semi-martingale market with respect to small changes in the market price of risk. Assuming that the preferences of a rational economic agent are modeled…
Market events such as order placement and order cancellation are examples of the complex and substantial flow of data that surrounds a modern financial engineer. New mathematical techniques, developed to describe the interactions of complex…
Sensitivity analysis is an important tool used in many domains of computational science to either gain insight into the mathematical model and interaction of its parameters or study the uncertainty propagation through the input-output…
In observational studies, exposures are often continuous rather than binary or discrete. At the same time, sensitivity analysis is an important tool that can help determine the robustness of a causal conclusion to a certain level of…
We propose a constraint-based flow-sensitive static analysis for concurrent programs by iteratively composing thread-modular abstract interpreters via the use of a system of lightweight constraints. Our method is compositional in that it…
The gauge theory of arbitrage was introduced by Ilinski in [arXiv:hep-th/9710148] and applied to fast money flows in [arXiv:cond-mat/9902044]. The theory of fast money flow dynamics attempts to model the evolution of currency exchange rates…
This paper closely examines theoretical and practical aspects of the widely used discounted cash flows (DCF) valuation method. It assesses its potentials as well as several weaknesses. A special emphasize is being put on the valuation of…
Recent advances in time series, where deterministic and stochastic modelings as well as the storage and analysis of big data are useless, permit a new approach to short-term traffic flow forecasting and to its reliability, i.e., to the…
We propose a general interpretation for long-range correlation effects in the activity and volatility of financial markets. This interpretation is based on the fact that the choice between `active' and `inactive' strategies is subordinated…
We provide a novel method for sensitivity analysis of parametric robust Markov chains. These models incorporate parameters and sets of probability distributions to alleviate the often unrealistic assumption that precise probabilities are…
A general market model with memory is considered in terms of stochastic functional differential equations. We aim at representation formulae for the sensitivity analysis of the dependence of option prices on the memory. This implies a…
Cash management is concerned with optimizing the short-term funding requirements of a company. To this end, different optimization strategies have been proposed to minimize costs using daily cash flow forecasts as the main input to the…
A simplified analysis is performed on the Bode-type filtering sensitivity trade-off integrals, which capture the sensitivity characteristics of the estimate and estimation error with respect to the process input and estimated signal in…
This paper describes a forward algorithm and an adjoint algorithm for computing sensitivity derivatives in chaotic dynamical systems, such as the Lorenz attractor. The algorithms compute the derivative of long time averaged "statistical"…