Related papers: No arbitrage SVI
In a seminal paper, F. Delbaen and W. Schachermayer proved that the classical NA ("no arbitrage") condition implies the existence of an "absolutely continuous local martingale measure" (ACLMM). It is known that in general the existence of…
The paper studies estimation of parameters of diffusion market models from historical data. The standard definition of implied volatility for these models presents its value as an implicit function of several parameters, including the…
Based on a recent work of Mancini-Thizy [28], we obtain the nonexistence of extremals for an inequality of Adimurthi-Druet [1] on a closed Riemann surface $(\Sigma,g)$. Precisely, if $\lambda_1(\Sigma)$ is the first eigenvalue of the…
We consider the problem of option pricing and hedging when stock returns are correlated in time. Within a quadratic-risk minimisation scheme, we obtain a general formula, valid for weakly correlated non-Gaussian processes. We show that for…
In this paper we study the short-time behavior of the at-the-money implied volatility for arithmetic Asian options with fixed strike price. The asset price is assumed to follow the Black-Scholes model with a general stochastic volatility…
This paper supplies two possible resolutions of Fortune's (2000) margin-loan pricing puzzle. Fortune (2000) noted that the margin loan interest rates charged by stock brokers are very high in relation to the actual (low) credit risk and the…
We consider a market with fractional Brownian motion with stochastic integrals generated by the Riemann sums. We found that this market is arbitrage free if admissible strategies that are using observations with an arbitrarily small delay.…
In a Markovian model for a financial market, we characterize the best arbitrage with respect to the market portfolio that can be achieved using nonanticipative investment strategies, in terms of the smallest positive solution to a parabolic…
This paper demonstrates a practical method for computing the solution of an expectation-constrained robust maximization problem with immediate applications to model-free no-arbitrage bounds and super-replication values for many financial…
We develop a formal construction of a pointwise divergence-free basis in the nonconforming virtual element method of arbitrary order for the Stokes problem introduced in [19]. The proposed construction can be seen as a generalization of the…
Variational inference (VI) is a widely used framework in Bayesian estimation. For most of the non-Gaussian statistical models, it is infeasible to find an analytically tractable solution to estimate the posterior distributions of the…
In a model independent discrete time financial market, we discuss the richness of the family of martingale measures in relation to different notions of Arbitrage, generated by a class $\mathcal{S}$ of significant sets, which we call…
Accurately characterizing the implied volatility curves is a central challenge in option pricing and risk management. The classical SABR model by Hagan et al. has been widely adopted in practice due to its well-defined stochastic volatility…
In [J. Wen, Y. Shi, Stat. Probab. Lett. 156 (2020) 108599] the authors first introduced a kind of anticipated backward stochastic Volterra integral equations (anticipated BSVIEs, for short). By virtue of the duality principle, it is found…
We propose a two-step framework for predicting the implied volatility surface over time without static arbitrage. In the first step, we select features to represent the surface and predict them over time. In the second step, we use the…
The vast majority of works on option pricing operate on the assumption of risk neutral valuation, and consequently focus on the expected value of option returns, and do not consider risk parameters, such as variance. We show that it is…
Decentralized exchanges using automated market makers create arbitrage opportunities with centralized exchanges, where gas fees and transaction ordering are critical. Existing models largely overlook competition among arbitrageurs, despite…
We establish four structural results for signature volatility models. First, we prove global existence and uniqueness of strong solutions to the signature SDE $dS_t = S_t \langle \ell, \widehat{W}_t \rangle \, dB_t$ on the weighted tensor…
In this brief note, we introduce a non-symmetric mixed finite element formulation for Brinkman equations written in terms of velocity, vorticity and pressure with non-constant viscosity. The analysis is performed by the classical…
By Gyongy's theorem, a local and stochastic volatility (LSV) model is calibrated to the market prices of all European call options with positive maturities and strikes if its local volatility function is equal to the ratio of the Dupire…