Related papers: Swaption Prices in HJM model. Nonparametric fit
Parallel tempering, also known as replica exchange sampling, is an important method for simulating complex systems. In this algorithm simulations are conducted in parallel at a series of temperatures, and the key feature of the algorithm is…
We consider call option prices in diffusion models close to expiry, in an asymptotic regime ("moderately out of the money") that interpolates between the well-studied cases of at-the-money options and out-of-the-money fixed-strike options.…
In this paper we derive a generic decomposition of the option pricing formula for models with finite activity jumps in the underlying asset price process (SVJ models). This is an extension of the well-known result by Alos (2012) for Heston…
In this paper, we study the pricing of contracts in fixed income markets under volatility uncertainty in the sense of Knightian uncertainty or model uncertainty. The starting point is an arbitrage-free bond market under volatility…
This paper aims to provide a practical example on the assessment and propagation of input uncertainty for option pricing when using tree-based methods. Input uncertainty is propagated into output uncertainty, reflecting that option prices…
We explore the possibility of designing matching mechanisms that can accommodate non-standard choice behavior. We pin down the necessary and sufficient conditions on participants' choice behavior for the existence of stable and incentive…
We construct models for the pricing and risk management of inflation-linked derivatives. The models are rational in the sense that linear payoffs written on the consumer price index have prices that are rational functions of the state…
Hamilton-Jacobi formalism as a powerful method is being utilized to reconsider warm inflationary scenario, where the scalar field as the main component deriving inflation interacts with other field. Separating the context to strong and weak…
The relationship between inflation and predictors such as unemployment is potentially nonlinear with a strength that varies over time, and prediction errors error may be subject to large, asymmetric shocks. Inspired by these concerns, we…
We discuss a general method of revealing both space-space and space-time noncommuting structures in various models in particle mechanics exhibiting reparametrisation symmetry. Starting from the commuting algebra in the conventional gauge,…
In this article a flexible Bayesian non-parametric model is proposed for non-homogeneous hidden Markov models. The model is developed through the amalgamation of the ideas of hidden Markov models and predictor dependent stick-breaking…
We develop a nonparametric test for deciding whether volatility of an asset follows a standard semimartingale process, with paths of finite quadratic variation, or a rough process with paths of infinite quadratic variation. The test…
Diffusion processes driven by Fractional Brownian motion (FBM) have often been considered in modeling stock price dynamics in order to capture the long range dependence of stock price observed in reality. Option prices for such models had…
In the spirit of Arrow-Debreu, we introduce a family of financial derivatives that act as primitive securities in that exotic derivatives can be approximated by their linear combinations. We call these financial derivatives signature…
We present an arbitrage-free non-parametric yield curve prediction model which takes the full (discretized) yield curve as state variable. We believe that absence of arbitrage is an important model feature in case of highly correlated data,…
In this paper, we derive closed-form formulas of first-order approximation for down-and-out barrier and floating strike lookback put option prices under a stochastic volatility model, by using an asymptotic approach. To find the explicit…
We consider settings where data are available on a nonparametric function and various partial derivatives. Such circumstances arise in practice, for example in the joint estimation of cost and input functions in economics. We show that when…
We study robust notions of good-deal hedging and valuation under combined uncertainty about the drifts and volatilities of asset prices. Good-deal bounds are determined by a subset of risk-neutral pricing measures such that not only…
In this paper we study the pricing of exchange options when underlying assets have stochastic volatility and stochastic correlation. An approximation using a closed-form approximation based on a Taylor expansion of the conditional price is…
The calibration of a local volatility models to a given set of option prices is a classical problem of mathematical finance. It was considered in multiple papers where various solutions were proposed. In this paper an extension of the…