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This article investigates the Fokker-Planck equations that arise from the application of quantum stochastic calculus to the modelling of illiquid financial markets, using asymptotic methods. We present a power series solution for quantum…
Modelling accurately financial price variations is an essential step underlying portfolio allocation optimization, derivative pricing and hedging, fund management and trading. The observed complex price fluctuations guide and constraint our…
Many random processes can be simulated as the output of a deterministic model accepting random inputs. Such a model usually describes a complex mathematical or physical stochastic system and the randomness is introduced in the input…
We prove existence and uniqueness of the solution of a stochastic shell--model. The equation is driven by an infinite dimensional fractional Brownian--motion with Hurst--parameter $H\in (1/2,1)$, and contains a non--trivial coefficient in…
This paper deals with the analysis of stochastic systems which can be described by a Langevin equation. By the method presented in this paper drift and diffusion terms of the corresponding Fokker-Planck equation can be extracted from the…
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…
We show that the Navier-Stokes as well as a random perturbation of this equation can be derived from a stochastic variational principle where the pressure is introduced as a Lagrange multiplier. Moreover we describe how to obtain…
Financial markets have long since been modeled using stochastic methods such as Brownian motion, and more recently, rough volatility models have been built using fractional Brownian motion. This fractional aspect brings memory into the…
Based on the existing literature, this article presents the different ways of choosing the parameters of stochastic volatility models in general, in the context of pricing financial derivative contracts. This includes the use of stochastic…
We investigate large changes, bursts, of the continuous stochastic signals, when the exponent of multiplicativity is higher than one. Earlier we have proposed a general nonlinear stochastic model which can be transformed into Bessel process…
We show that a cumulative action of noise and delayed feedback on an excitable theta-neuron leads to rather coherent stochastic bursting. An idealized point process, valid if the characteristic time scales in the problem are well-separated,…
The kinetic equation is crucial for understanding the statistical properties of stochastic processes, yet current equations, such as the classical Fokker-Planck, are limited to local analysis. This paper derives a new kinetic equation for…
Guyon and Lekeufack recently proposed a path-dependent volatility model and documented its excellent performance in fitting market data and capturing stylized facts. The instantaneous volatility is modeled as a linear combination of two…
This paper studies a continuous-time market {under stochastic environment} where an agent, having specified an investment horizon and a target terminal mean return, seeks to minimize the variance of the return with multiple stocks and a…
Agents' heterogeneity is recognized as a driver mechanism for the persistence of financial volatility. We focus on the multiplicity of investment strategies' horizons, we embed this concept in a continuous time stochastic volatility…
A weak invariant of a stochastic system is defined in such a way that its expectation value with respect to the distribution function as a solution of the associated Fokker-Planck equation is constant in time. A general formula is given for…
We review theoretical models of individual motility as well as collective dynamics and pattern formation of active particles. We focus on simple models of active dynamics with a particular emphasis on nonlinear and stochastic dynamics of…
The correlated stochastic volatility models constitute a natural extension of the Black and Scholes-Merton framework: here the volatility is not a constant, but a stochastic process correlated with the price log-return one. At present,…
This study presents contemporaneous modeling of asset return and price range within the framework of stochastic volatility with leverage. A new representation of the probability density function for the price range is provided, and its…
This paper develops a new stochastic volatility model for the temperature that is a natural extension of the Ornstein-Uhlenbeck model proposed by Benth and Benth (2007). This model allows to be more conservative regarding extreme events…