Related papers: On the probability flow in the Stock market I: The…
The theory of isospectral flows comprises a large class of continuous dynamical systems, particularly integrable systems and Lie--Poisson systems. Their discretization is a classical problem in numerical analysis. Preserving the spectra in…
Focusing on gains & losses relative to a risk-free benchmark instead of terminal wealth, we consider an asset allocation problem to maximize time-consistently a mean-risk reward function with a general risk measure which is i)…
For common people, in contrast to brokers, bankers, and those who play on rising and falling prices of stocks, the stock market law is based on the simple fact that the depositors aim for financial profit at any given concrete stage. The…
We consider arbitrage free valuation of European options in Black-Scholes and Merton markets, where the general structure of the market is known, however the specific parameters are not known. In order to reflect this subjective uncertainty…
We study Markowitz's mean-variance portfolio selection problem in a continuous-time Black-Scholes market with different borrowing and saving rates. The associated Hamilton-Jacobi-Bellman equation is fully nonlinear. Using a delicate partial…
In this paper, we establish a link between quantum stochastic processes, and nonlocal diffusions. We demonstrate how the non-commutative Black-Scholes equation of Accardi & Boukas (Luigi Accardi, Andreas Boukas, 'The Quantum Black-Scholes…
We show how to derive the Black-Scholes model and its generalisation to the `exchange-option' (to exchange one asset for another) via the continuum limit of the Binomial tree. No knowledge of stochastic calculus or partial differential…
We deal with some generalizations on a Black--Scholes model arising in financial mathematics. As novelty in this paper, we consider a variable volatility and abstract functional boundary conditions, which allow us to treat a very large…
The space of call price functions has a natural noncommutative semigroup structure with an involution. A basic example is the Black--Scholes call price surface, from which an interesting inequality for Black--Scholes implied volatility is…
Expanding the ideas of the author's paper 'Nonexpansive maps and option pricing theory' (Kibernetica 34:6 (1998), 713-724) we develop a pure game-theoretic approach to option pricing, by-passing stochastic modeling. Risk neutral…
We consider a portfolio with call option and the corresponding underlying asset under the standard assumption that stock-market price represents a random variable with lognormal distribution. Minimizing the variance (hedging risk) of the…
In financial markets, the order flow, defined as the process assuming value one for buy market orders and minus one for sell market orders, displays a very slowly decaying autocorrelation function. Since orders impact prices, reconciling…
We consider strategies of investments into options and diffusion market model. It is shown that there exists a correct proportion between "put" and "call" in the portfolio such that the average gain is almost always positive for a generic…
Economic and financial theories and practice essentially deal with uncertain future. Humans encounter uncertainty in different kinds of activity, from sensory-motor control to dynamics in financial markets, what has been subject of…
The path probability of a particle undergoing stochastic motion is studied by the use of functional technique, and the general formula is derived for the path probability distribution functional. The probability of finding paths inside a…
We model the logarithm of the price (log-price) of a financial asset as a random variable obtained by projecting an operator stable random vector with a scaling index matrix $\underline{\underline{E}}$ onto a non-random vector. The scaling…
In the previous paper (Inverse Problems, 32, 015010, 2016), a new heuristic mathematical model was proposed for accurate forecasting of prices of stock options for 1-2 trading days ahead of the present one. This new technique uses the…
The path probability of stochastic motion of non dissipative or quasi-Hamiltonian systems is investigated by numerical experiment. The simulation model generates ideal one-dimensional motion of particles subject only to conservative forces…
We discuss the role of information entropy on the behaviour of random processes, and how this might take effect in the dynamics of financial market prices. We then go on to show how the Open Quantum Systems approach can be used as a more…
We study specific nonlinear transformations of the Black-Scholes implied volatility to show remarkable properties of the volatility surface. Model-free bounds on the implied volatility skew are given. Pricing formulas for the European…