Related papers: Pricing derivatives in Hermite markets
The aim of this work is to introduce a new stochastic volatility model for equity derivatives. To overcome some of the well-known problems of the Heston model, and more generally of the affine models, we define a new specification for the…
We study hedging and pricing of unattainable contingent claims in a non-Markovian regime-switching financial model. Our financial market consists of a bank account and a risky asset whose dynamics are driven by a Brownian motion and a…
The classical discrete time model of proportional transaction costs relies on the assumption that a feasible portfolio process has solvent increments at each step. We extend this setting in two directions, allowing for convex transaction…
We introduce fractional Brownian motion processes (fBm) as an alternative model for the turbulent index of refraction. These processes allow to reconstruct most of the index properties, but they are not differentiable. We overcome the…
We study the semimartingale properties for the generalized fractional Brownian motion (GFBM) introduced by Pang and Taqqu (2019) and discuss the applications of the GFBM and its mixtures to financial asset pricing. The GFBM is self-similar…
We present a framework for hedging a portfolio of derivatives in the presence of market frictions such as transaction costs, market impact, liquidity constraints or risk limits using modern deep reinforcement machine learning methods. We…
In a Markovian model for a financial market, we characterize the best arbitrage with respect to the market portfolio that can be achieved using nonanticipative investment strategies, in terms of the smallest positive solution to a parabolic…
Freight rate derivatives constitute a very popular financial tool in shipping industry, that allows to the market participants and the individuals operating in the field, to reassure their financial positions against the risk occurred by…
A Markovian modulation captures the trend in the market and influences the market coefficients accordingly. The different scenarios presented by the market are modeled as the distinct states of a discrete-time Markov chain. In our paper, we…
In complete markets, there are risky assets and a riskless asset. It is assumed that the riskless asset and the risky asset are traded continuously in time and that the market is frictionless. In this paper, we propose a new method for…
The general method is proposed for constructing a family of martingale measures for a wide class of evolution of risky assets. The sufficient conditions are formulated for the evolution of risky assets under which the family of equivalent…
This paper defines fractional Heston-type (fHt) model as an arbitrage-free financial market model with the infinitesimal return volatility described by the square of a single stochastic equation with respect to fractional Brownian motion…
Travel time derivatives are financial instruments that derive their value from road travel times, serving as an underlying asset that cannot be directly traded. Within the transportation domain, these derivatives are proposed as a more…
We study, from the perspective of large financial markets, the asymptotic arbitrage opportunities in a sequence of binary markets approximating the fractional Black-Scholes model. This approximating sequence was introduced by Sottinen and…
We develop a robust framework for pricing and hedging of derivative securities in discrete-time financial markets. We consider markets with both dynamically and statically traded assets and make minimal measurability assumptions. We obtain…
In the paper we study markets with concave transaction costs which depend in a concave way on the volume of transaction. This is typical situation in the case of small investors, which commonly appears in currency and real estate markets.…
Non-equilibrium phenomena occur not only in physical world, but also in finance. In this work, stochastic relaxational dynamics (together with path integrals) is applied to option pricing theory. A recently proposed model (by Ilinski et…
We consider plain vanilla European options written on an underlying asset that follows a continuous time semi-Markov multiplicative process. We derive a formula and a renewal type equation for the martingale option price. In the case in…
We investigate the optimal strategy over a finite time horizon for a portfolio of stock and bond and a derivative in an multiplicative Markovian market model with transaction costs (friction). The optimization problem is solved by a…
This study evaluates the practical usefulness of continuous-time arbitrage strategies designed to exploit serial correlation in fractional financial markets. Specifically, we revisit the strategies of Shiryaev (1998) and Salopek (1998) and…