Related papers: A triple comparison between anticipating stochasti…
We establish existence of Predictable Forward Performance Processes (PFPPs) in complete markets, which has been previously shown only in the binomial setting. Our market model can be a discrete-time or a continuous-time model, and the…
Recently path integral methods have been developed for stochastic optimal control for a wide class of models with non-linear dynamics in continuous space-time. Path integral methods find the control that minimizes the expected cost-to-go.…
By employing the technique of enlargement of filtrations, we demonstrate how to incorporate information about the future trend of the stochastic interest rate process into a financial model. By modeling the interest rate as an affine…
We study two-dimensional stochastic differential equations (SDEs) of McKean--Vlasov type in which the conditional distribution of the second component of the solution given the first enters the equation for the first component of the…
Evolutionary algorithms have been widely used for a range of stochastic optimization problems in order to address complex real-world optimization problems. We consider the knapsack problem where the profits involve uncertainties. Such a…
Using Malliavin Calculus techniques, we derive closed-form expressions for the at-the-money behaviour of the forward implied volatility, its skew and its curvature, in general Markovian stochastic volatility models with continuous paths.
In this paper, we develop an optimization-based framework for solving coupled forward-backward stochastic differential equations. We introduce an integral-form objective function and prove its equivalence to the error between consecutive…
A numerical approach for the approximation of inertial manifolds of stochastic evolutionary equations with multiplicative noise is presented and illustrated. After splitting the stochastic evolutionary equations into a backward and a…
We develop a novel - cylindrical - solution concept for stochastic evolution equations. Our motivation is to establish a Heath-Jarrow-Morton framework capable of analysing financial term structures with discontinuities, overcoming deep…
This work evaluates the magnitude of the turbulent energy cascade in terms of forward and backward scattering by modeling the "stretch and fold" mechanism through a drift-free Hanggi-Klimontovich stochastic process. Mapping this dynamics…
A continuous-time Markowitz's mean-variance portfolio selection problem is studied in a market with one stock, one bond, and proportional transaction costs. This is a singular stochastic control problem,inherently in a finite time horizon.…
Energy companies need efficient procedures to perform market calibration of stochastic models for commodities. If the Black framework is chosen for option pricing, the bottleneck of the market calibration is the computation of the variance…
This work extends a previous work in regime detection, which allowed trading positions to be profitably adjusted when a new regime was detected, to ex ante prediction of regimes, leading to substantial performance improvements over the…
Multivariate volatility modeling and forecasting are crucial in financial economics. This paper develops a copula-based approach to model and forecast realized volatility matrices. The proposed copula-based time series models can capture…
In today's increasingly international economy, return and volatility spillover effects across international equity markets are major macroeconomic drivers of stock dynamics. Thus, information regarding foreign markets is one of the most…
We present a function-valued stochastic volatility model designed to capture the continuous-time evolution of forward curves in fixed-income or commodity markets. The dynamics of the (logarithmic) forward curves are defined by a…
Motivated from time-inconsistent stochastic control problems, we introduce a new type of coupled forward-backward stochastic systems, namely, flows of forward-backward stochastic differential equations. They are systems consisting of a…
In this paper, we address the stochastic representation problem in discrete time under (non-linear) g-expectation. We establish existence and uniqueness of the solution, as well as a characterization of the solution. As an application, we…
Many resource management problems require sequential decision-making under uncertainty, where the only uncertainty affecting the decision outcomes are exogenous variables outside the control of the decision-maker. We model these problems as…
We analyze the relative price change of assets starting from basic supply/demand considerations subject to arbitrary motivations. The resulting stochastic differential equation has coefficients that are functions of supply and demand. We…