Related papers: Another Look at the Ho-Lee Bond Option Pricing Mod…
This paper presents a geometric description on Lie algebroids of Lagrangian systems subject to nonholonomic constraints. The Lie algebroid framework provides a natural generalization of classical tangent bundle geometry. We define the…
We show that the results of ArXiv:1305.6008 on the Fundamental Theorem of Asset Pricing and the super-hedging theorem can be extended to the case in which the options available for static hedging (\emph{hedging options}) are quoted with…
Many chemical processes exhibit diverse timescale dynamics with a strong coupling between timescale sensitive variables. Model predictive control with a non-uniformly spaced optimisation horizon is an effective approach to multi-timescale…
Modeling of the dependence structure across heterogeneous data is crucial for Bayesian inference since it directly impacts the borrowing of information. Despite the extensive advances over the last two decades, most available proposals…
We consider the problem of modeling discrete-valued vector time series data using extensions of Chow-Liu tree models to capture both dependencies across time and dependencies across variables. Conditional Chow-Liu tree models are…
We develop likelihood-based bias reduction for nonlinear panel models with additive individual and time effects. In two-way panels, integrated-likelihood corrections are attractive but challenging because the required integration is high…
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…
In this paper we introduce a sublinear conditional expectation with respect to a family of possibly nondominated probability measures on a progressively enlarged filtration. In this way, we extend the classic reduced-form setting for credit…
In the present paper we show that the Binomial-tree approach for pricing, hedging, and risk assessment of Convertible bonds in the framework of the Tsiveriotis-Fernandes model has serious drawbacks. Key words: Convertible bonds, Binomial…
An extension of the Heath--Jarrow--Morton model for the development of instantaneous forward interest rates with deterministic coefficients and Gaussian as well as L\'evy field noise terms is given. In the special case where the L\'evy…
Binomial tree methods (BTM) and explicit difference schemes (EDS) for the variational inequality model of American options with time dependent coefficients are studied. When volatility is time dependent, it is not reasonable to assume that…
We introduce a new stochastic duration model for transaction times in asset markets. We argue that widely accepted rules for aggregating seemingly related trades mislead inference pertaining to durations between unrelated trades: while any…
We develop a framework that systematically casts the solvability and uniqueness conditions of linearized geometric boundary-value problems into cohomological terms. The theory is designed to be applicable without assumptions on the…
In this paper we compare two classical one-factor diffusion models which are used to model the term structure of interest rates. One of them is based on the Wiener-Bachelier process while the second one is based on the Ornstein-Uhlenbeck…
In this paper, finite element method is applied to Leland's model for numerical simulation of option pricing with transaction costs. Spatial finite element models based on P1 and/or P2 elements are formulated in combination with a…
The extensions of the classical Debye model of susceptibility of dielectric materials to the well-known Cole-Cole, Davidson- Cole, or the Havriliak-Negami models is done by introducing non-integer power parameters to the frequency-domain…
In this article we are interested in the boundary stabilization in finite time of one-dimensional linear hyperbolic balance laws with coefficients depending on time and space. We extend the so called "backstepping method" by introducing…
We revisit identification based on timing and information set assumptions in structural models, which have been used in the context of production functions, demand equations, and hedonic pricing models (e.g. Olley and Pakes (1996), Blundell…
In this paper we are interested in term structure models for pricing zero coupon bonds under rapidly oscillating stochastic volatility. We analyze solutions to the generalized Cox-Ingersoll-Ross two factors model describing clustering of…
We investigate pricing-hedging duality for American options in discrete time financial models where some assets are traded dynamically and others, e.g. a family of European options, only statically. In the first part of the paper we…