Related papers: Option Pricing with Mixed Levy Subordinated Price …
We develop a theoretical trading conditioning model subject to price volatility and return information in terms of market psychological behavior, based on analytical transaction volume-price probability wave distributions in which we use…
We model investor heterogeneity using different required returns on an investment and evaluate the impact on the valuation of an investment. By assuming no disagreement on the cash flows, we emphasize how risk preferences in particular, but…
Identifying meaningful relationships between the price movements of financial assets is a challenging but important problem in a variety of financial applications. However with recent research, particularly those using machine learning and…
Prediction markets rely on liquidity to convert trades into informative prices, yet existing mechanisms fix liquidity ex ante. This restriction enforces a static trade-off between price responsiveness and worst-case loss despite inherently…
We present a reinforcement-learning (RL) framework for dynamic hedging of equity index option exposures under realistic transaction costs and position limits. We hedge a normalized option-implied equity exposure (one unit of underlying…
Exponential L\'evy processes can be used to model the evolution of various financial variables such as FX rates, stock prices, etc. Considerable efforts have been devoted to pricing derivatives written on underliers governed by such…
Transformer models have become increasingly popular in financial applications, yet their potential risk making and biases remain under-explored. The purpose of this work is to audit the reliance of the model on volatile data for…
In this paper, we present a method for constructing a (static) portfolio of co-maturing European options whose price sign is determined by the skewness level of the associated implied volatility. This property holds regardless of the…
The additive process generalizes the L\'evy process by relaxing its assumption of time-homogeneous increments and hence covers a larger family of stochastic processes. Recent research in option pricing shows that modeling the underlying log…
Exponential L\'evy processes have been used for modelling financial derivatives because of their ability to exhibit many empirical features of markets. Using their multidimensional analogue, a general analytic pricing formula is obtained,…
Models to price long term loans in the securities lending business are developed. These longer horizon deals can be viewed as contracts with optionality embedded in them. This insight leads to the usage of established methods from…
Behavioral finance has become an increasingly important subfield of finance. However the main parts of behavioral finance, prospect theory included, understand financial markets through individual investment behavior. Behavioral finance…
We present a dynamical model for the price evolution of financial assets. The model is based in a two level structure. In the first stage one finds an agent-based model that describes the present state of the investors' beliefs,…
A speculative agent with Prospect Theory preference chooses the optimal time to purchase and then to sell an indivisible risky asset to maximize the expected utility of the round-trip profit net of transaction costs. The optimization…
We model the dynamics of asset prices and associated derivatives by consideration of the dynamics of the conditional probability density process for the value of an asset at some specified time in the future. In the case where the price…
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…
In this paper it was developed a modification of the known multiagent model Minority Game, designed to simulate the behavior of traders in financial markets and the resulting price dynamics on the abstract resource. The model was…
During the last decade Levy processes with jumps have received increasing popularity for modelling market behaviour for both derviative pricing and risk management purposes. Chan et al. (2009) introduced the use of empirical likelihood…
The dynamics of market prices is described as the evolution of opinions in the trading community regarding future market behavior. The price then is a function of the voting process of the market players in favor to raise or reduce the…
Behavioral Finance has become a challenge to the scientific community. Based on the assumption that behavioral aspects of investors may explain some features of the Stock Market, we propose an agent based model to study quantitatively this…