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We prove that the variance swap rate (fair strike) equals the price of a co-terminal European-style contract when the underlying is an exponential Markov process, time-changed by an arbitrary continuous stochastic clock, which has arbitrary…
This article investigates a regime-switching investment strategy aimed at mitigating downside risk by reducing market exposure during anticipated unfavorable market regimes. We highlight the statistical jump model (JM) for market regime…
The concepts of probability, statistics and stochastic theory are being successfully used in structural engineering. Markov Chain modelling is a simple stochastic process model that has found its application in both describing stochastic…
We consider a risk-sensitive optimization of consumption-utility on infinite time horizon where the one-period investment gain depends on an underlying economic state whose evolution over time is assumed to be described by a discrete-time,…
This research addresses accurate option pricing by employing models beyond the traditional Black-Scholes framework. While Black-Scholes provides a closed-form solution, it is limited by assumptions of constant volatility, no dividends, and…
This paper presents the solution to a European option pricing problem by considering a regime-switching jump diffusion model of the underlying financial asset price dynamics. The regimes are assumed to be the results of an observed pure…
We propose a flexible stochastic framework for modeling the market share dynamics over time in a multiple markets setting, where firms interact within and between markets. Firms undergo stochastic idiosyncratic shocks, which contract their…
This paper concerns a local volatility model in which volatility takes two possible values, and the specific value depends on whether the underlying price is above or below a given threshold value. The model is known, and a number of…
This paper is concerned with the problem of finding the optimal of extraction policies of an oil field in light of various financial and economical restrictions and constraints. Taking into account the fact that the oil price in worldwide…
Accurate price predictions are essential for market participants in order to optimize their operational schedules and bidding strategies, especially in the current context where electricity prices become more volatile and less predictable…
This paper investigates the role of high-dimensional information sets in the context of Markov switching models with time varying transition probabilities. Markov switching models are commonly employed in empirical macroeconomic research…
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…
Equity markets have long been regarded as unpredictable, with intraday price movements treated as stochastic noise. This study challenges that view by introducing the Extended Samuelson Model (ESM), a natural science-based framework that…
Psychological change processes, such as university student dropout in math, often exhibit discrete latent state transitions and can be studied using regime-switching models with intensive longitudinal data (ILD). Recently, regime-switching…
This paper intends to apply the Hidden Markov Model into stock market and and make predictions. Moreover, four different methods of improvement, which are GMM-HMM, XGB-HMM, GMM-HMM+LSTM and XGB-HMM+LSTM, will be discussed later with the…
In this paper, we price European Call three different option pricing models, where the volatility is dynamically changing i.e. non constant. In stochastic volatility (SV) models for option pricing a closed form approximation technique is…
Stock price change in financial market occurs through transactions in analogy with diffusion in stochastic physical systems. The analysis of price changes in real markets shows that long-range correlations of price fluctuations largely…
This study investigates the integration of forecasting and optimization in energy management systems, with a focus on the role of switching costs -- penalties incurred from frequent operational adjustments. We develop a theoretical and…
The problem of appropriately matching items subject to compatibility constraints arises in a number of important applications. While most of the literature on matching theory focuses on a static setting with a fixed number of items, several…
This work generalizes the subdiffusive Black-Scholes model by introducing the variable exponent in order to provide adequate descriptions for the option pricing, where the variable exponent may account for the variation of the memory…