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Spread options are a fundamental class of derivative contract written on multiple assets, and are widely used in a range of financial markets. There is a long history of approximation methods for computing such products, but as yet there is…

We propose a multi-scale stochastic volatility model in which a fast mean-reverting factor of volatility is built on top of the Heston stochastic volatility model. A singular pertubative expansion is then used to obtain an approximation for…

This work studies the valuation of currency options in markets suffering from a financial crisis. We consider a European option where the underlying asset is a foreign currency. We assume that the value of the underlying asset is a…

Under a generalized skew normal distribution we consider the problem of European option pricing. Existence of the martingale measure is proved. An explicit expression for a given European option price is presented in terms of the cumulative…

We consider the bilateral trade problem, in which two agents trade a single indivisible item. It is known that the only dominant-strategy truthful mechanism is the fixed-price mechanism: given commonly known distributions of the buyer's…

A new notion of stochastic ordering is introduced to compare multivariate stochastic risk models with respect to extreme portfolio losses. In the framework of multivariate regular variation comparison criteria are derived in terms of…

This dissertation develops and justifies a novel method for deriving approximate formulas to estimate two parameters in stochastic volatility diffusion models with exponentially-affine characteristic functions and single- or two-factor…

This papers addresses the stock option pricing problem in a continuous time market model where there are two stochastic tradable assets, and one of them is selected as a num\'eraire. It is shown that the presence of arbitrarily small…

We introduce a combinatorial variant of the cost sharing problem: several services can be provided to each player and each player values every combination of services differently. A publicly known cost function specifies the cost of…

In this survey paper we discuss recent advances on short interest rate models which can be formulated in terms of a stochastic differential equation for the instantaneous interest rate (also called short rate) or a system of such equations…

This paper presents how to apply the stochastic collocation technique to assets that can not move below a boundary. It shows that the polynomial collocation towards a lognormal distribution does not work well. Then, the potentials issues of…

Stablecoins - crypto tokens whose value is pegged to a real-world asset such as the US Dollar - are an important component of the DeFi ecosystem as they mitigate the impact of token price volatility. In crypto-backed stablecoins, the peg is…

This study proposes a novel approach to ensemble prediction, called "covariate-dependent stacking" (CDST). Unlike traditional stacking and model averaging methods, CDST allows model weights to vary flexibly as a function of covariates,…

The purpose of the paper is to present a new pricing method for clean spread options, and to illustrate its main features on a set of numerical examples produced by a dedicated computer code. The novelty of the approach is embedded in the…

Using spectral decomposition techniques and singular perturbation theory, we develop a systematic method to approximate the prices of a variety of options in a fast mean-reverting stochastic volatility setting. Four examples are provided in…

In this paper we study the pricing of exchange options under a dynamic described by stochastic correlation with random jumps. In particular, we consider a Ornstein-Uhlenbeck covariance model with Levy Background Noise Process driven by…

We consider option pricing using a discrete-time Markov switching stochastic volatility with co-jump model, which can model volatility clustering and varying mean-reversion speeds of volatility. For pricing European options, we develop a…

We model stochastic choice as environment-dependent switching among a small library of deterministic decision rules. A Random Rule Model generates menu-level choice probabilities via named, interpretable rules weighted by observable menu…

Bi-factor and second-order models based on copulas are proposed for item response data, where the items can be split into non-overlapping groups such that there is a homogeneous dependence within each group. Our general models include the…

Although behavioral economics has demonstrated that there are many situations where rational choice is a poor empirical model, it has so far failed to provide quantitative models of economic problems such as price formation. We make a step…