Related papers: Stochastic Deflator for an Economic Scenario Gener…
In our model, private actors with interbank cash flows similar to, but nore general than (Carmona, Fouque, Sun, 2013) borrow from the outside economy at a certain interest rate, controlled by the central bank, and invest in risky assets.…
In this paper we study dynamic pricing mechanisms of financial derivatives. A typical model of such pricing mechanism is the so-called g--expectation defined by solutions of a backward stochastic differential equation with g as its…
Even simple inflationary scenarios have many free parameters. Beyond the variables appearing in the inflationary action, these include dynamical initial conditions, the number of fields, and couplings to other sectors. These quantities are…
There are insights of chaotic properties in economic systems and data. To prove the existence of chaotic dynamics, the establishment of a deterministic model is mandatory. A global modelling tool (GPoM) is used to search for mathematical…
As smart contract platforms autonomously manage billions of dollars of capital, quantifying the portfolio risk that investors engender in these systems is increasingly important. Recent work illustrates that Proof of Stake (PoS) is…
In this paper, we introduce the rich classes of conditional distortion (CoD) risk measures and distortion risk contribution ($\Delta$CoD) measures as measures of systemic risk and analyze their properties and representations. The classes…
In this paper, we establish a market model for the term structure of forward inflation rates based on the risk-neutral dynamics of nominal and real zero-coupon bonds. Under the market model, we can price inflation caplets as well as…
We propose a simple stochastic model of market behavior. Dividing market participants into two groups: trend-followers and fundamentalists, we derive the general form of a stochastic equation of market dynamics. The model has two…
In a globalised world, inflation in a given country may be becoming less responsive to domestic economic activity, while being increasingly determined by international conditions. Consequently, understanding the international sources of…
This paper deals with the construction of a metamodel (i.e. a simplified mathematical model) for a stochastic computer code (also called stochastic numerical model or stochastic simulator), where stochastic means that the code maps the…
We develop a framework for stochastic portfolio theory (SPT), which incorporates modern nonlinear price impact and impact decay models. Our main result is the derivation of the celebrated master formula for additive functional generation of…
Vector autoregression is an essential tool in empirical macroeconomics and finance for understanding the dynamic interdependencies among multivariate time series. In this study, we expand the scope of vector autoregression by incorporating…
In the past few decades considerable effort has been expended in characterizing and modeling financial time series. A number of stylized facts have been identified, and volatility clustering or the tendency toward persistence has emerged as…
In this paper incomplete-information models are developed for the pricing of securities in a stochastic interest rate setting. In particular we consider credit-risky assets that may include random recovery upon default. The market…
We analyze sources of error in prediction market forecasts in order to bound the difference between a security's price and the ground truth it estimates. We consider cost-function-based prediction markets in which an automated market maker…
Mounting empirical evidence suggests that the observed extreme prices within a trading period can provide valuable information about the volatility of the process within that period. In this paper we define a class of stochastic volatility…
The problem of investing into a cryptocurrency market requires good understanding of the processes that regulate the price of the currency. In this paper we offer a view of a cryptocurrency market as an environment for realization of a…
In a continuous time stochastic economy, this paper considers the problem of consumption and investment in a financial market in which the representative investor exhibits a change in the discount rate. The investment opportunities are a…
Recent developments in deep learning techniques have motivated intensive research in machine learning-aided stock trading strategies. However, since the financial market has a highly non-stationary nature hindering the application of…
We explore a stochastic model that enables capturing external influences in two specific ways. The model allows for the expression of uncertainty in the parametrisation of the stochastic dynamics and incorporates patterns to account for…