Related papers: A pure-jump mean-reverting short rate model
The paper examines a class of first order linear hyperbolic systems, proposed as a generalization of the Goldstein-Kac model for velocity-jump processes and determined by a finite number of speeds and corresponding transition rates. It is…
We propose a strategy for automated trading, outline theoretical justification of the profitability of this strategy and overview the hypothetical results in application to currency pairs trading. The proposed methodology relies on the…
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…
In this paper we develop a semi-closed form solutions for the barrier (perhaps, time-dependent) and American options written on the underlying stock which follows a time-dependent OU process with a log-normal drift. This model is equivalent…
This paper studies the timing of trades under mean-reverting price dynamics subject to fixed transaction costs. We solve an optimal double stopping problem to determine the optimal times to enter and subsequently exit the market, when…
We provide a general and tractable framework under which all multiple yield curve modeling approaches based on affine processes, be it short rate, Libor market, or HJM modeling, can be consolidated. We model a numeraire process and…
We introduce an affine extension of the Heston model where the instantaneous variance process contains a jump part driven by $\alpha$-stable processes with $\alpha\in(1,2]$. In this framework, we examine the implied volatility and its…
A price-maker company extracts an exhaustible commodity from a reservoir, and sells it instantaneously in the spot market. In absence of any actions of the company, the commodity's spot price evolves either as a drifted Brownian motion or…
Options with maturities below one week, hereafter "ultra-short-term" options, have seen a sharp increase in trading activity in recent years. Yet, these instruments are difficult to price jointly using classical pricing models due to the…
The primary challenge of market making in spot precious metals is navigating the liquidity that is mainly provided by futures contracts. The Exchange for Physical (EFP) spread, which is the price difference between futures and spot, plays a…
We construct a new process using a fractional Brownian motion and a fractional Ornstein-Uhlenbeck process of the Second Kind as building blocks. We consider the increments of the new process in discrete time and, as a result, we obtain a…
Pure-jump L\'evy processes are popular classes of stochastic processes which have found many applications in finance, statistics or machine learning. In this paper, we propose a novel family of self-decomposable L\'evy processes where one…
We investigate a one-dimensional model of active motion, which takes into account the effects of persistent self-propulsion through a memory function in a dissipative-like term of the generalized Langevin equation for particle swimming…
In this paper we propose a semi-analytic approach to pricing American options for time-dependent jump-diffusions models with exponential jumps The idea of the method is to further generalize our approach developed for pricing barrier,…
Optimal control models for limit order trading often assume that the underlying asset price is a Brownian motion since they deal with relatively short time scales. The resulting optimal bid and ask limit order prices tend to track the…
We give an explicit representation for the transition law of a tempered stable Ornstein-Uhlenbeck process and use it to develop a rejection sampling algorithm for exact simulation of increments from this process. Our results apply to…
We study the strong approximation of a rough volatility model, in which the log-volatility is given by a fractional Ornstein-Uhlenbeck process with Hurst parameter $H<1/2$. Our methods are based on an equidistant discretization of the…
We develop and justify methodology to consistently test for long-horizon return predictability based on realized variance. To accomplish this, we propose a parametric transaction-level model for the continuous-time log price process based…
We focus on mean-variance hedging problem for models whose asset price follows an exponential additive process. Some representations of mean-variance hedging strategies for jump type models have already been suggested, but none is suited to…
L\'evy-driven Ornstein-Uhlenbeck (OU) processes represent an intriguing class of stochastic processes that have garnered interest in the energy sector for their ability to capture typical features of market dynamics. However, in the current…