Related papers: No arbitrage SVI
We investigate financial markets under model risk caused by uncertain volatilities. For this purpose we consider a financial market that features volatility uncertainty. To have a mathematical consistent framework we use the notion of…
The paper develops no arbitrage results for trajectory based models by imposing general constraints on the trading portfolios. The main condition imposed, in order to avoid arbitrage opportunities, is a local continuity requirement on the…
We consider a generic empirical composition optimization problem, where there are empirical averages present both outside and inside nonlinear loss functions. Such a problem is of interest in various machine learning applications, and…
This paper revisits a well-studied anti-plane shear deformation problem formulated by Knowles in 1976 and analytical solutions in general nonlinear elasticity proposed by Gao since 1998. Based on minimum potential principle, a…
In this paper, we prove the global risk optimality of the hedging strategy of contingent claim, which is explicitly (or called semi-explicitly) constructed for an incomplete financial market with external risk factors of non-Gaussian…
Instrumental variable (IV) methods offer a valuable approach to account for outcome data missing not-at-random. A valid missing data instrument is a measured factor which (i) predicts the nonresponse process and (ii) is independent of the…
The goal of this paper is to prove a result conjectured in F\"ollmer and Schachermayer [FS07], even in slightly more general form. Suppose that S is a continuous semimartingale and satisfies a large deviations estimate; this is a particular…
Black-box variational inference tries to approximate a complex target distribution though a gradient-based optimization of the parameters of a simpler distribution. Provable convergence guarantees require structural properties of the…
Our derivation of the distribution function for future returns is based on the risk neutral approach which gives a functional dependence for the European call (put) option price, C(K), given the strike price, K, and the distribution…
The important application of semi-static hedging in financial markets naturally leads to the notion of quasi self-dual processes. The focus of our study is to give new characterizations of quasi self-duality for exponential L\'evy processes…
We apply Gauge Theory of Arbitrage (GTA) {hep-th/9710148} to derivative pricing. We show how the standard results of Black-Scholes analysis appear from GTA and derive correction to the Black-Scholes equation due to a virtual arbitrage and…
We propose a new least-squares Monte Carlo algorithm for the approximation of conditional expectations in the presence of stochastic derivative weights. The algorithm can serve as a building block for solving dynamic programming equations,…
This paper investigates the necessary optimality conditions for uniformly overtaking optimal control on infinite horizon in the free end case. %with free right endpoint. In the papers of S.M.Aseev, A.V.Kryazhimskii, V.M.Veliov, K.O.Besov…
This paper proposes two approaches that quantify the exact relationship among the viability, the absence of arbitrage, and/or the existence of the num\'eraire portfolio under minimal assumptions and for general continuous-time market…
In the paper, we characterize the asymptotic behavior of the implied volatility of a basket call option at large and small strikes in a variety of settings with increasing generality. First, we obtain an asymptotic formula with an error…
We analyze the empirical performance of several non-parametric estimators of the pricing functional for European options, using historical put and call prices on the S&P500 during the year 2012. Two main families of estimators are…
We present a new numerical method to price vanilla options quickly in time-changed Brownian motion models. The method is based on rational function approximations of the Black-Scholes formula. Detailed numerical results are given for a…
We discuss the fundamental issue of identification in linear instrumental variable (IV) models with unknown IV validity. With the assumption of the "sparsest rule", which is equivalent to the plurality rule but becomes operational in…
We consider a univariate semimartingale model for (the logarithm of) an asset price, containing jumps having possibly infinite activity (IA). The nonparametric threshold estimator of the integrated variance IV proposed in Mancini 2009 is…
We study markets with no riskless (safe) asset. We derive the corresponding Black-Scholes-Merton option pricing equations for markets where there are only risky assets which have the following price dynamics: (i) continuous diffusions; (ii)…