Related papers: Term structure modeling for multiple curves with s…
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…
Overwhelming majority of econometric models applied on a long term basis in the financial forex market do not work sufficiently well. The reason is that transaction costs and arbitrage opportunity are not included, as this does not simulate…
In this paper, we study term structure movements in the spirit of Heath, Jarrow, and Morton [Econometrica 60(1), 77-105] under volatility uncertainty. We model the instantaneous forward rate as a diffusion process driven by a G-Brownian…
We present an arbitrage-free non-parametric yield curve prediction model which takes the full (discretized) yield curve as state variable. We believe that absence of arbitrage is an important model feature in case of highly correlated data,…
This paper studies the effect of quarterly earnings reports on the stock price. The profitability of the stock is modelled by geometric Brownian diffusion and the Constant Elasticity of Variance model. We fit several variations of…
In this paper we provide a quantitative analysis to the concept of arbitrage, that allows to deal with model uncertainty without imposing the no-arbitrage condition. In markets that admit ``small arbitrage", we can still make sense of the…
We develop theory leading to testing procedures for the presence of a change point in the intraday volatility pattern. The new theory is developed in the framework of Functional Data Analysis. It is based on a model akin to the stochastic…
In this paper we introduce a simple continuous-time asset pricing framework, based on general multi-dimensional diffusion processes, that combines semi-analytic pricing with a nonlinear specification for the market price of risk. Our…
Financial markets are a complex dynamical system. The complexity comes from the interaction between a market and its participants, in other words, the integrated outcome of activities of the entire participants determines the markets trend,…
A heat kernel approach is proposed for the development of a general, flexible, and mathematically tractable asset pricing framework in finite time. The pricing kernel, giving rise to the price system in an incomplete market, is modelled by…
Regime-switching models, in particular Hidden Markov Models (HMMs) where the switching is driven by an unobservable Markov chain, are widely-used in financial applications, due to their tractability and good econometric properties. In this…
In this paper, we consider daily financial data of a collection of different stock market indices, exchange rates, and interest rates, and we analyze their multi-scaling properties by estimating a simple specification of the…
In the option valuation literature, the shortcomings of one factor stochastic volatility models have traditionally been addressed by adding jumps to the stock price process. An alternate approach in the context of option pricing and…
We consider a stochastic volatility model with jumps where the underlying asset price is driven by the process sum of a 2-dimensional Brownian motion and a 2-dimensional compensated Poisson process. The market is incomplete, resulting in…
We revisit the problem of pricing and hedging plain vanilla single-currency interest rate derivatives using multiple distinct yield curves for market coherent estimation of discount factors and forward rates with different underlying rate…
We propose Variational Heteroscedastic Volatility Model (VHVM) -- an end-to-end neural network architecture capable of modelling heteroscedastic behaviour in multivariate financial time series. VHVM leverages recent advances in several…
We introduce a stochastic price model where, together with a random component, a moving average of logarithmic prices contributes to the price formation. Our model is tested against financial datasets, showing an extremely good agreement…
The LIBOR rate is currently scheduled for discontinuation, and the replacement advocated by regulators in the US is the Secured Overnight Financing Rate (SOFR). The change has the potential to disrupt the $200 trillion market of derivatives…
We study a continuous-time financial market with continuous price processes under model uncertainty, modeled via a family $\mathcal{P}$ of possible physical measures. A robust notion ${\rm NA}_{1}(\mathcal{P})$ of no-arbitrage of the first…
We develop a behavioral asset pricing model in which agents trade in a market with information friction. Profit-maximizing agents switch between trading strategies in response to dynamic market conditions. Due to noisy private information…