Related papers: Explosion in the quasi-Gaussian HJM model
This paper investigates how the conditional quantiles of future returns and volatility of financial assets vary with various measures of ex-post variation in asset prices as well as option-implied volatility. We work in the flexible…
We consider a stochastic volatility model with L\'evy jumps for a log-return process $Z=(Z_{t})_{t\geq 0}$ of the form $Z=U+X$, where $U=(U_{t})_{t\geq 0}$ is a classical stochastic volatility process and $X=(X_{t})_{t\geq 0}$ is an…
We provide analytical pricing formula of corporate defaultable bond with both expected and unexpected default in the case with stochastic default intensity. In the case with constant short rate and exogenous default recovery using PDE…
We present a study of the short-maturity asymptotics for VIX and European option prices in local-stochastic volatility models with compound Poisson jumps. Both out-of-the-money (OTM) and at-the-money (ATM) asymptotics are considered. The…
For any $\nu\in(\frac 37,\frac12)$, we prove the existence of an $H^1$ solution $u$ of the mass critical generalized Korteweg-de Vries equation on the time interval $(0,T_0]$, for some $T_0>0$, which blows up at the time $t=0$ and at the…
We analyse the behaviour of the implied volatility smile for options close to expiry in the exponential L\'evy class of asset price models with jumps. We introduce a new renormalisation of the strike variable with the property that the…
The drift burst hypothesis postulates the existence of short-lived locally explosive trends in the price paths of financial assets. The recent U.S. equity and treasury flash crashes can be viewed as two high-profile manifestations of such…
This paper investigates the Gaussian quasi-likelihood estimation of an exponentially ergodic multidimensional Markov process, which is expressed as a solution to a L\'{e}vy driven stochastic differential equation whose coefficients are…
As is known, an elementary excitation of a many-particle system with boundaries is not characterized by a definite momentum. We obtain the formula for the quasimomentum of an elementary excitation for a one-dimensional system of $N$…
We find various exact solutions for a new stochastic volatility (SV) model: the transition probability density, European-style option values, and (when it exists) the martingale defect. This may represent the first example of an SV model…
For a long time interest-rate models were built on a single yield curve used both for discounting and forwarding. However, the crisis that has affected financial markets in the last years led market players to revise this assumption and…
Closed form option pricing formulae explaining skew and smile are obtained within a parsimonious non-Gaussian framework. We extend the non-Gaussian option pricing model of L. Borland (Quantitative Finance, {\bf 2}, 415-431, 2002) to include…
Based on a continuous-time stochastic volatility model with a linear drift, we develop a test for explosive behavior in financial asset prices at a low frequency when prices are sampled at a higher frequency. The test exploits the…
The linear $\sigma$-model with a chemical potential for hypercharge is a toy model for the description of the dynamics of the kaon condensate in high density QCD. We analyze the dynamics of the gauged version of this model. It is shown that…
In this article we propose a $\alpha$-hypergeometric model with uncertain volatility (UV) where we derive a worst-case scenario for option pricing. The approach is based on the connexion between a certain class of nonlinear partial…
We investigate the metallic breakdown of a substrate on which highly conducting particles are adsorbed and desorbed with a probability that depends on the local electric field. We find that, by tuning the relative strength $q$ of this…
Stochastic volatility models are the backbone of financial engineering. We study both continuous time diffusions as well as discrete time models. We propose two novel approaches to estimating stochastic volatility diffusions, one using…
We develop an efficient pricing approach for guaranteed minimum withdrawal benefits (GMWBs) with continuous withdrawals under a realistic modeling setting with jump-diffusions and stochastic interest rate. Utilizing an impulse stochastic…
We develop further the spot volatility estimator introduced in Hoffmann, Munk and Schmidt-Hieber (2012) from a practical point of view and make it useful for the analysis of high-frequency financial data. In a first part, we adjust the…
We introduce a novel stochastic volatility model where the squared volatility of the asset return follows a Jacobi process. It contains the Heston model as a limit case. We show that the joint density of any finite sequence of log returns…