Related papers: Pathwise functional calculus and applications to c…
We propose a novel probabilistic model to facilitate the learning of multivariate tail dependence of multiple financial assets. Our method allows one to construct from known random vectors, e.g., standard normal, sophisticated joint…
In this paper, we establish a probabilistic representation as well as some integration by parts formulae for the marginal law at a given time maturity of some stochastic volatility model with unbounded drift. Relying on a perturbation…
In this work we consider one-dimensional generalized affine processes under the paradigm of Knightian uncertainty (so-called non-linear generalized affine models). This extends and generalizes previous results in Fadina et al. (2019) and…
Transition-related financial markets are increasingly exposed to abrupt repricing episodes, elevated volatility, and heterogeneous macro-financial shocks. Under such conditions, conventional Gaussian-linear forecasting frameworks may…
In this paper we present a rather general phenomenological theory of tick-by-tick dynamics in financial markets. Many well-known aspects, such as the L\'evy scaling form, follow as particular cases of the theory. The theory fully takes into…
The lead-lag effect, where the price movement of one asset systematically precedes that of another, has been widely observed in financial markets and conveys valuable predictive signals for trading. However, traditional lead-lag detection…
In this paper, we study the probabilistic stability analysis of a subclass of stochastic hybrid systems, called the Planar Probabilistic Piecewise Constant Derivative Systems (Planar PPCD), where the continuous dynamics is deterministic,…
This paper is a continuation of Akahori-Barsotti-Imamura (2017) and where the authors i) showed that a payment at a random time, which we call timing risk, is decomposed into an integral of static positions of knock-in type barrier options,…
To investigate a time-consistent optimal strategy for the continuous time mean-variance model, we develop a new method to establish the Bellman principle. Based on this new method, we obtain a time-consistent dynamic optimal strategy that…
We study reinforcement learning for controlled diffusion processes with unbounded continuous state spaces, bounded continuous actions, and polynomially growing rewards: settings that arise naturally in finance, economics, and operations…
Over the last decade, nonparametric methods have gained increasing attention for modeling complex data structures due to their flexibility and minimal structural assumptions. In this paper, we study a general multivariate nonparametric…
This study contributes to understanding Valuation Adjustments (xVA) by focussing on the dynamic hedging of Credit Valuation Adjustment (CVA), corresponding Profit & Loss (P&L) and the P&L explain. This is done in a Monte Carlo simulation…
This paper includes an original self contained proof of well-posedness of an initial-boundary value problem involving a non-local parabolic PDE which naturally arises in the study of derivative pricing in a generalized market model. We call…
This paper investigates the investment problem of constructing an optimal no-short sequential portfolio strategy in a market with a latent dependence structure between asset prices and partly unobservable side information, which is often…
This paper addresses the portfolio selection problem for nonlinear law-dependent preferences in continuous time, which inherently exhibit time inconsistency. Employing the method of stochastic maximum principle, we establish verification…
In this note, we consider a general discrete time financial market with proportional transaction costs as in Kabanov and Stricker (2001), Kabanov et al. (2002), Kabanov et al. (2003) and Schachermayer (2004). We provide a dual formulation…
In this paper we present a theoretical framework for determining dynamic ask and bid prices of derivatives using the theory of dynamic coherent acceptability indices in discrete time. We prove a version of the First Fundamental Theorem of…
We determine the variance-optimal hedge when the logarithm of the underlying price follows a process with stationary independent increments in discrete or continuous time. Although the general solution to this problem is known as backward…
We use pathwise It\^o calculus to prove two strictly pathwise versions of the master formula in Fernholz' stochastic portfolio theory. Our first version is set within the framework of F\"ollmer's pathwise It\^o calculus and works for…
We consider the robust pricing and hedging of American options in a continuous time setting. We assume asset prices are continuous semimartingales, but we allow for general model uncertainty specification via adapted closed convex…