Related papers: Hyperbolic normal stochastic volatility model
This study presents new analytic approximations of the stochastic-alpha-beta-rho (SABR) model. Unlike existing studies that focus on the equivalent Black-Scholes (BS) volatility, we instead derive the equivalent…
In this paper we consider the simulation-based Bayesian analysis of stochastic volatility in mean (SVM) models. Extending the highly efficient Markov chain Monte Carlo mixture sampler for the SV model proposed in Kim et al. (1998) and Omori…
In this paper, we consider a two-dimensional sticky Brownian motion. Sticky Brownian motions can be viewed as time-changed semimartingale reflecting Brownian motions, which find applications in many areas including queueing theory and…
We introduce a new class of heavy-tailed distributions for which any weighted average of independent and identically distributed random variables is larger than one such random variable in (usual) stochastic order. We show that many…
This paper introduces a Bayesian vector autoregression (BVAR) with stochastic volatility-in-mean and time-varying skewness. Unlike previous approaches, the proposed model allows both volatility and skewness to directly affect macroeconomic…
The present paper proposes a new framework for describing the stock price dynamics. In the traditional geometric Brownian motion model and its variants, volatility plays a vital role. The modern studies of asset pricing expand around…
Accurate forecasting of volatility and return quantiles is essential for evaluating financial tail risks such as value-at-risk and expected shortfall. This study proposes an extension of the traditional stochastic volatility model, termed…
We study the Heston model, where the stock price dynamics is governed by a geometrical (multiplicative) Brownian motion with stochastic variance. We solve the corresponding Fokker-Planck equation exactly and, after integrating out the…
We consider a large market model of defaultable assets in which the asset price processes are modelled as Heston-type stochastic volatility models with default upon hitting a lower boundary. We assume that both the asset prices and their…
The purpose of this paper is to implement a random death process into a persistent random walk model which produces subballistic superdiffusion (L\'{e}vy walk). We develop a Markovian model of cell motility with the extra residence variable…
Model uncertainty is a type of inevitable financial risk. Mistakes on the choice of pricing model may cause great financial losses. In this paper we investigate financial markets with mean-volatility uncertainty. Models for stock markets…
We propose a hybrid estimation procedure to estimate global fixed parameters and subject-specific random effects in a mixed fractional Black-Scholes model based on discrete-time observations. Specifically, we consider $N$ independent…
In this work, we investigate the large-scale transport properties of a passive scalar advected by a turbulent fluid, modelled as a superposition of divergence-free vector fields, each weighted by an independent symmetric…
We consider a model of stochastic volatility which combines features of the multiplicative model for large volatilities and of the Heston model for small volatilities. The steady-state distribution in this model is a Beta Prime and is…
In this work, we consider systems that are subjected to intermittent instabilities due to external stochastic excitation. These intermittent instabilities, though rare, have a large impact on the probabilistic response of the system and…
This paper proposes a hybrid methodology to improve the approximation of SABR (Stochastic Alpha Beta Rho) implied volatility by combining analytical structure with machine learning. The approach augments the neural-network input…
We propose here some new sampling algorithms for Path Sampling in the case when stochastic dynamics are used. In particular, we present a new proposal function for equilibrium sampling of paths with a Monte-Carlo dynamics (the so-called…
Sticky Brownian motions, as time-changed semimartingale reflecting Brownian motions, have various applications in many fields, including queuing theory and mathematical finance. In this paper, we are concerned about the stationary…
In this paper, we price European Call three different option pricing models, where the volatility is dynamically changing i.e. non constant. In stochastic volatility (SV) models for option pricing a closed form approximation technique is…
This study employs expected certainty equivalents to explore the reinsurance and investment issue pertaining to an insurer that aims to maximize the expected utility while being subject to random risk aversion. The insurer's surplus process…