Related papers: Pricing with Variance Gamma Information
We study the pricing of credit derivatives with asymmetric information. The managers have complete information on the value process of the firm and on the default threshold, while the investors on the market have only partial observations,…
We characterise the solutions to a continuous-time optimal liquidity provision problem in a market populated by informed and uninformed traders. In our model, the asset price exhibits fads -- these are short-term deviations from the…
The purpose of this article is to introduce a new L\'evy process, termed Variance Gamma++ process, to model the dynamic of assets in illiquid markets. Such a process has the mathematical tractability of the Variance Gamma process and is…
This paper presents a multinomial method for option pricing when the underlying asset follows an exponential Variance Gamma process. The continuous time Variance Gamma process is approximated by a discrete time Markov chain with the same…
An efficient conditioning technique, the so-called Brownian Bridge simulation, has previously been applied to eliminate pricing bias that arises in applications of the standard discrete-time Monte Carlo method to evaluate options written on…
In this article we focus on the pricing of exchange options when the dynamic of logprices follows either the well-known variance gamma or the recent variance gamma++ process introduced in Gardini et al [19]. In particular, for the former…
This paper explores the concept of random-time subordination in modelling stock-price dynamics, and We first present results on the Laplace distribution as a Gaussian variance-mixture, in particular a more efficient volatility estimation…
This paper proposes to model asset price dynamics with a mixture of diffusion processes where the instantaneous volatility of the underlying diffusion process contains a random vector. The marginal probability distributions of the proposed…
The existence of the pricing kernel is shown to imply the existence of an ambient information process that generates market filtration. This information process consists of a signal component concerning the value of the random variable X…
We propose a method for extending a given asset pricing formula to account for two additional sources of risk: the risk associated with future changes in market--calibrated parameters and the remaining risk associated with idiosyncratic…
The variance gamma model is a widely popular model for option pricing in both academia and industry. In this paper, we provide a new perspective for pricing European style options for the variance gamma model by deriving closed-form…
The paper proposes a class of financial market models which are based on inhomogeneous telegraph processes and jump diffusions with alternating volatilities. It is assumed that the jumps occur when the tendencies and volatilities are…
Stochastic volatility models describe asset prices $S_t$ as driven by an unobserved process capturing the random dynamics of volatility $\sigma_t$. Here, we quantify how much information about $\sigma_t$ can be inferred from asset prices…
In the regime switching extension of Black-Scholes-Merton model of asset price dynamics, one assumes that the volatility coefficient evolves as a hidden pure jump process. Under the assumption of Markov regime switching, we have considered…
We establish several closed pricing formula for various path-independent payoffs, under an exponential L\'evy model driven by the Variance Gamma process. These formulas take the form of quickly convergent series and are obtained via tools…
The pricing of options, warrants and other derivative securities is one of the great success of financial economics. These financial products can be modeled and simulated using quantum mechanical instruments based on a Hamiltonian…
The issue of giving an explicit description of the flow of information concerning the time of bankruptcy of a company (or a state) arriving on the market is tackled by defining a bridge process starting from zero and conditioned to be equal…
Generating realistic synthetic option prices requires implied volatility as an input, yet implied volatility is itself derived from observed option prices, creating a circular dependency that limits synthetic data for machine-learning and…
This paper develops a continuous-time filtering framework for estimating a hazard rate subject to an unobservable change-point. This framework naturally arises in both financial and insurance applications, where the default intensity of a…
In this paper we introduce a class of information-based models for the pricing of fixed-income securities. We consider a set of continuous- time information processes that describe the flow of information about market factors in a monetary…