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We examine how the most prevalent stochastic properties of key financial time series have been affected during the recent financial crises. In particular we focus on changes associated with the remarkable economic events of the last two…
Time variation and persistence are crucial properties of volatility that are often studied separately in energy volatility forecasting models. Here, we propose a novel approach that allows shocks with heterogeneous persistence to vary…
We study consumer demand in large-scale retail settings with many products, multiple categories and repeated purchase behavior. While inertia and brand loyalty are well documented, existing discrete choice models typically focus on single…
In the over-the-counter market in derivatives, we sometimes see large numbers of traders taking the same position and risk. When there is this kind of concentration in the market, the position impacts the pricings of all other derivatives…
In this paper, we propose and study a novel continuous-time model, based on the well-known constant elasticity of variance (CEV) model, to describe the asset price process. The basic idea is that the volatility elasticity of the CEV model…
Increases in global food prices have led to widespread hunger and social unrest---and an imperative to understand their causes. In a previous paper published in September 2011, we constructed for the first time a dynamic model that…
We introduce a local volatility model for the valuation of options on commodity futures by using European vanilla option prices. The corresponding calibration problem is addressed within an online framework, allowing the use of multiple…
Stable and efficient food markets are crucial for global food security, yet international staple food markets are increasingly exposed to complex risks, including intensified risk contagion and escalating external uncertainties. This paper…
Global oil price is an important factor in determining many economic variables in the world's economy. It is generally modeled as a stochastic process and have been studied through different techniques by comparing the historic time series…
Recent increases in basic food prices are severely impacting vulnerable populations worldwide. Proposed causes such as shortages of grain due to adverse weather, increasing meat consumption in China and India, conversion of corn to ethanol…
Most models for barrier pricing are designed to let a market maker tune the model-implied covariance between moves in the asset spot price and moves in the implied volatility skew. This is often implemented with a local…
We develop cointegration for multivariate continuous-time stochastic processes, both in finite and infinite dimension. Our definition and analysis are based on factor processes and operators mapping to the space of prices and cointegration.…
There are various metrics for financial risk, such as value at risk (VaR), expected shortfall, expected/unexpected loss, etc. When estimating these metrics, it was very common to assume Gaussian distribution for the asset returns, which may…
Price transmission has been studied extensively in agricultural economics through the lens of spatial and vertical price relationships. Classical time series econometric techniques suffer from the "curse of dimensionality" and are applied…
We introduce a multivariate diffusion model that is able to price derivative securities featuring multiple underlying assets. Each asset volatility smile is modeled according to a density-mixture dynamical model while the same property…
This paper presents a comparative analysis of univariate and multivariate GARCH-family models and machine learning algorithms in modeling and forecasting the volatility of major energy commodities: crude oil, gasoline, heating oil, and…
This paper studies equity basket options -- i.e., multi-dimensional derivatives whose payoffs depend on the value of a weighted sum of the underlying stocks -- and develops a new and innovative approach to ensure consistency between options…
We present a quantitative study of the markets and models evolution across the credit crunch crisis. In particular, we focus on the fixed income market and we analyze the most relevant empirical evidences regarding the divergences between…
Mining companies to properly manage their operations and be ready to make business decisions, are required to analyze potential scenarios for main market risk factors. The most important risk factors for KGHM, one of the biggest companies…
This article presents an empirical study of thirteen derivative markets for commodity and financial assets. It compares the statistical properties of futures contracts's daily returns at different maturities, from 1998 to 2010 and for…