Related papers: A lognormal type stochastic volatility model with …
A new multi-factor short rate model is presented which is bounded from below by a real-valued function of time. The mean-reverting short rate process is modeled by a sum of pure-jump Ornstein--Uhlenbeck processes such that the related bond…
We show that in a large class of stochastic volatility models with additional skew-functions (local-stochastic volatility models) the tails of the cumulative distribution of the log-returns behave as exp(-c|y|), where c is a positive…
We study the martingale property and moment explosions of a signature volatility model, where the volatility process of the log-price is given by a linear form of the signature of a time-extended Brownian motion. Excluding trivial cases, we…
We introduce an affine extension of the Heston model where the instantaneous variance process contains a jump part driven by $\alpha$-stable processes with $\alpha\in(1,2]$. In this framework, we examine the implied volatility and its…
Based on criteria of mathematical simplicity and consistency with empirical market data, a stochastic volatility model is constructed, the volatility process being driven by fractional noise. Price return statistics and asymptotic behavior…
In this paper we consider a fractional stochastic volatility model, that is a model in which the volatility may exhibit a long-range dependent or a rough/antipersistent behavior. We propose a dynamic sequential Monte Carlo methodology that…
In the present paper we present a finite element approach for option pricing in the framework of a well-known stochastic volatility model with jumps, the Bates model. In this model the asset log-returns are assumed to follow a…
We study risk-sharing equilibria with general convex costs on the agents' trading rates. For an infinite-horizon model with linear state dynamics and exogenous volatilities, we prove that the equilibrium returns mean-revert around their…
We present and discuss a stochastic model of financial assets dynamics based on the idea of an inverse renormalization group strategy. With this strategy we construct the multivariate distributions of elementary returns based on the scaling…
The shape and tails of partial distribution functions (PDF) for a financial signal, i.e. the S&P500 and the turbulent nature of the markets are linked through a model encompassing Tsallis nonextensive statistics and leading to evolution…
It is well documented that a model for the underlying asset price process that seeks to capture the behaviour of the market prices of vanilla options needs to exhibit both diffusion and jump features. In this paper we assume that the asset…
We investigate the Gatheral model of double mean-reverting stochastic volatility, in which the drift term itself follows a mean-reverting process, and the overall model exhibits mean-reverting behavior. We demonstrate that such processes…
Large tick assets, i.e. assets where one tick movement is a significant fraction of the price and bid-ask spread is almost always equal to one tick, display a dynamics in which price changes and spread are strongly coupled. We introduce a…
We study hedging and pricing of unattainable contingent claims in a non-Markovian regime-switching financial model. Our financial market consists of a bank account and a risky asset whose dynamics are driven by a Brownian motion and a…
Recent empirical studies suggest that the volatility of an underlying price process may have correlations that decay slowly under certain market conditions. In this paper, the volatility is modeled as a stationary process with long-range…
Jump diffusion processes are widely used to model asset prices over time, mainly for their ability to capture complex discontinuous behavior, but inference on the model parameters remains a challenge. Here our goal is posterior inference on…
This study presents contemporaneous modeling of asset return and price range within the framework of stochastic volatility with leverage. A new representation of the probability density function for the price range is provided, and its…
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…
The non-gaussianity of processes observed in financial markets and relatively good performance of gaussian models can be reconciled by replacing the Brownian motion with Levy processes whose Levy densities decay as exp(-lambda|x|) or…
We consider estimation of the spot volatility in a stochastic boundary model with one-sided microstructure noise for high-frequency limit order prices. Based on discrete, noisy observations of an It\^o semimartingale with jumps and general…