Related papers: Term Structure Modeling under Volatility Uncertain…
Options with maturities below one week, hereafter "ultra-short-term" options, have seen a sharp increase in trading activity in recent years. Yet, these instruments are difficult to price jointly using classical pricing models due to the…
The problem of eliminating fast-relaxing variables to obtain an effective drift-diffusion process in position is solved in a uniform and straightforward way for models with velocity a function jointly of position and fast variables. A more…
We consider a class of asset pricing models, where the risk-neutral joint process of log-price and its stochastic variance is an affine process in the sense of Duffie, Filipovic and Schachermayer [2003]. First we obtain conditions for the…
We introduce a discrete binary tree for pricing contingent claims with the underlying security prices exhibiting history dependence characteristic of that induced by market microstructure phenomena. Example dependencies considered include…
This paper contains a phenomenological description of the whole U.S. forward rate curve (FRC), based on an data in the period 1990-1996. We find that the average FRC (measured from the spot rate) grows as the square-root of the maturity,…
Estimation and counterfactual analysis in dynamic structural models rely on assumptions about the dynamic process of latent variables, which may be misspecified. We propose a framework to quantify the sensitivity of scalar parameters of…
The high dynamics and heterogeneous interactions in the complicated urban systems have raised the issue of uncertainty quantification in spatiotemporal human mobility, to support critical decision-makings in risk-aware web applications such…
Economists often estimate economic models on data and use the point estimates as a stand-in for the truth when studying the model's implications for optimal decision-making. This practice ignores model ambiguity, exposes the decision…
We consider a system of noncolliding Brownian motions introduced in our previous paper, in which the noncolliding condition is imposed in a finite time interval $(0,T]$. This is a temporally inhomogeneous diffusion process whose transition…
This paper considers mutual obligations in the interconnected bank system and analyzes their influence on joint and marginal survival probabilities as well as CDS and FTD prices for the individual banks. To make the role of mutual…
Standard diffusion equation is based on Brownian motion of the dispersing species without considering persistence in the movement of the individuals. This description allows for the instantaneous spreading of the transported species over an…
Based on the energy gradient method, criteria for turbulent transition are proposed for pressure driven flow and shear driven flow, respectively. For pressure driven flow, the necessary and sufficient condition for turbulent transition is…
Unimodular gravity is an alternative theory of gravity to general relativity. The gravitational field equations are given by the trace-free version of Einstein's field equations. Due to the structure of the theory, unimodular gravity admits…
We develop theory and applications of forward characteristic processes in discrete time following a seminal paper of Jan Kallsen and Paul Kr\"uhner. Particular emphasis is placed on the dynamics of volatility surfaces which can be easily…
We describe a model for evolving commodity forward prices that incorporates three important dynamics which appear in many commodity markets: mean reversion in spot prices and the resulting Samuelson effect on volatility term structure,…
This paper investigates the time-varying impacts of international macroeconomic uncertainty shocks. We use a global vector autoregressive specification with drifting coefficients and factor stochastic volatility in the errors to model six…
We study evolution equations of drift-diffusion type when various parameters are random. Motivated by applications in pedestrian dynamics, we focus on the case when the total mass is, due to boundary or reaction terms, not conserved. After…
Time variation and persistence are crucial properties of volatility that are often studied separately in energy volatility forecasting models. Here, we propose a novel approach that allows shocks with heterogeneous persistence to vary…
We introduce a framework that allows to employ (non-negative) measure-valued processes for energy market modeling, in particular for electricity and gas futures. Interpreting the process' spatial structure as time to maturity, we show how…
In this paper, we study the pricing of contingent claims under G-expectation. In order to accomodate volatility uncertainty, the price of the risky security is supposed to governed by a general linear stochastic differential equation (SDE)…