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For model-based estimation methods, the modeling that is as close to reality as possible makes a vital estimation result. In simple applications, it is sufficient to model a system with a single state space model. However, there are…
In this research, two-state Markov switching models are proposed to study accident frequencies and severities. These models assume that there are two unobserved states of roadway safety, and that roadway entities (e.g., roadway segments)…
This paper proposes a market consistent valuation framework for variable annuities with guaranteed minimum accumulation benefit, death benefit and surrender benefit features. The setup is based on a hybrid model for the financial market and…
Multi-state models provide an extension of the usual survival/event-history analysis setting. In the medical domain, multi-state models give the possibility of further investigating intermediate events such as relapse and remission. In this…
In this paper, we provide a comprehensive cross-country validation study of compositional mortality modeling and forecasting methods. Thus, we consider two one-to-one transformations: the cumulative distribution function and the centered…
In this paper, we have studied option pricing methods that are based on a Bayesian Markov-Switching Vector Autoregressive (MS-BVAR) process using a risk-neutral valuation approach. A BVAR process, which is a special case of the Bayesian…
Not all contracts are good, but all good contracts can be expressed as a finite-state transition system ("State-Transition Contracts"). Contracts that can be represented as State-Transition Contracts discretize fat-tailed risk to…
In the continuous time mean-variance model, we want to minimize the variance (risk) of the investment portfolio with a given mean at terminal time. However, the investor can stop the investment plan at any time before the terminal time. To…
In this paper, two-state Markov switching models are proposed to study accident frequencies. These models assume that there are two unobserved states of roadway safety, and that roadway entities (roadway segments) can switch between these…
Topos quantum theory provides representations of quantum states as direct generalizations of the probability distribution, namely probability valuation. In this article, we consider extensions of a known bijective correspondence between…
We introduce a new volatility model for option pricing that combines Markov switching with the Realized GARCH framework. This leads to a novel pricing kernel with a state-dependent variance risk premium and a pricing formula for European…
The shortcomings of the popular Black-Scholes-Merton (BSM) model have led to models which could more accurately model the behavior of the underlying assets in energy markets, particularly in electricity and future oil prices. In this paper…
The three state illness death model has been established as a general approach for regression analysis of semi competing risks data. For observational data the marginal structural models (MSM) are a useful tool, under the potential outcomes…
Variance plays a crucial role in risk-sensitive reinforcement learning, and most risk measures can be analyzed via variance. In this paper, we consider two law-invariant risks as examples: mean-variance risk and exponential utility risk.…
This paper investigates the pricing of European-style lookback options when the price dynamics of the underlying risky asset are assumed to follow a Markov-modulated Geo-metric Brownian motion; that is, the appreciation rate and the…
We propose a Markov jump process with the three-state herding interaction. We see our approach as an agent-based model for the financial markets. Under certain assumptions this agent-based model can be related to the stochastic description…
Previous research has found that high-frequency traders will vary the bid or offer price rapidly over periods of milliseconds. This is a benefit to fast traders who can time their trades with microsecond precision, however it is a cost to…
This paper studies pricing derivatives in an age-dependent semi-Markov modulated market. We consider a financial market where the asset price dynamics follow a regime switching geometric Brownian motion model in which the coefficients…
Mortality is different across countries, states and regions. Several empirical research works however reveal that mortality trends exhibit a common pattern and show similar structures across populations. The key element in analyzing…
This paper investigates the valuation of variable annuity contracts with an early surrender option under non-Markovian models. Moreover, policyholders are provided with guaranteed minimum maturity and death benefits to protect against the…