Related papers: Real-world forward rate dynamics with affine reali…

In this paper we consider two processes driven by diffusions and jumps. The jump components are Levy processes and they can both have finite activity and infinite activity. Given discrete observations we estimate the covariation between the…

In this work we consider one-dimensional generalized affine processes under the paradigm of Knightian uncertainty (so-called non-linear generalized affine models). This extends and generalizes previous results in Fadina et al. (2019) and…

We find approximate solutions of partial integro-differential equations, which arise in financial models when defaultable assets are described by general scalar L\'evy-type stochastic processes. We derive rigorous error bounds for the…

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 consider a market with a term structure of credit risky bonds in the single-name case. We aim at minimal assumptions extending existing results in this direction: first, the random field of forward rates is driven by a general…

In the paper [Hainaut, D. and Colwell, D.B., {\rm A structural model for credit risk with switching processes and synchronous jumps}, The European Journal of Finance 22(11) (2016): 1040-1062], the authors exploit a synchronous-jump…

Bernstein processes are Brownian diffusions that appear in Euclidean Quantum Mechanics. Knowledge of the symmetries of the Hamilton-Jacobi-Bellman equation associated with these processes allows one to obtain relations between stochastic…

We construct the term structure of the (forward-looking, US market) equity risk premium from SPX option chains. The method is "model-light". Risk-neutral probability densities are estimated by fitting $N$-component Gaussian mixture models…

Recent developments on financial markets have revealed the limits of Brownian motion pricing models when they are applied to actual markets. L\'evy processes, that admit jumps over time, have been found more useful for applications. Thus,…

In this article we propose a study of market models starting from a set of axioms, as one does in the case of risk measures. We define a market model simply as a mapping from the set of adapted strategies to the set of random variables…

In this paper we consider the problem of pricing a perpetual American put option in an exponential regime-switching L\'{e}vy model. For the case of the (dense) class of phase-type jumps and finitely many regimes we derive an explicit…

In this paper we inquire inflationary scenarios built on a simplified version of the polynomial affine model of gravity. Given the absence of a metric tensor in the formulation of the model, we build a \emph{kinetic term} contracting the…

By using absolutely continuous lower bounds of the L\'evy measure, explicit gradient estimates are derived for the semigroup of the corresponding L\'evy process with a linear drift. A derivative formula is presented for the conditional…

In this paper, we study the asymptotic behaviors of implied volatility of an affine jump-diffusion model. Let log stock price under risk-neutral measure follow an affine jump-diffusion model, we show that an explicit form of moment…

For the pedestrian observer, financial markets look completely random with erratic and uncontrollable behavior. To a large extend, this is correct. At first approximation the difference between real price changes and the random walk model…

We calculate the realized volatility in the spin model of financial markets and examine the returns standardized by the realized volatility. We find that moments of the standardized returns agree with the theoretical values of standard…

Large deviations for fat tailed distributions, i.e. those that decay slower than exponential, are not only relatively likely, but they also occur in a rather peculiar way where a finite fraction of the whole sample deviation is concentrated…

The field of risk theory has traditionally focused on ruin-related quantities. In particular, the socalled Expected Discounted Penalty Function has been the object of a thorough study over the years. Although interesting in their own right,…

Trajectory tracking of nonlinear dynamical systems with affine open-loop controls is investigated. The control task is to enforce the system state to follow a prescribed desired trajectory as closely as possible. We introduce exactly…

Sustaining efficiency and stability by properly controlling the equity to asset ratio is one of the most important and difficult challenges in bank management. Due to unexpected and abrupt decline of asset values, a bank must closely…