Related papers: Analysis of a five-factor capital market model
We examine a general multi-factor model for commodity spot prices and futures valuation. We extend the multi-factor long-short model in Schwartz and Smith (2000) and Yan (2002) in two important aspects: firstly we allow for both the long…
In this paper we study the optimal investment and reinsurance problem of an insurance company whose investment preferences are described via a forward dynamic exponential utility in a regime-switching market model. Financial and actuarial…
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…
A well-interpretable measure of information has been recently proposed based on a partition obtained by intersecting a random sequence with its moving average. The partition yields disjoint sets of the sequence, which are then ranked…
Index tracking, also known as passive investing, has gained significant traction in financial markets due to its cost-effective and efficient approach to replicating the performance of a specific market index. This review paper provides a…
We study the problem of optimal long term portfolio selection with a view to beat a benchmark. Two kinds of objectives are considered. One concerns the probability of outperforming the benchmark and seeks either to minimise the decay rate…
Dynamic jumps in the price and volatility of an asset are modelled using a joint Hawkes process in conjunction with a bivariate jump diffusion. A state space representation is used to link observed returns, plus nonparametric measures of…
We construct models for the pricing and risk management of inflation-linked derivatives. The models are rational in the sense that linear payoffs written on the consumer price index have prices that are rational functions of the state…
Building upon factor decomposition to overcome the curse of dimensionality inherent in multivariate volatility processes, we develop a factor model-based multivariate stochastic volatility (fMSV) framework. We propose a two-stage estimation…
We introduce a new model for describing the fluctuations of a tick-by-tick single asset price. Our model is based on Markov renewal processes. We consider a point process associated to the timestamps of the price jumps, and marks associated…
Volatility is the canonical measure of financial risk, a role largely inherited from Modern Portfolio Theory. Yet, its universality rests on restrictive efficiency assumptions that render volatility, at best, an incomplete proxy for true…
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…
The general problem of asset pricing when the discount rate differs from the rate at which an asset's cash flows accrue is considered. A pricing kernel framework is used to model an economy that is segmented into distinct markets, each…
This report presents a systematic market-neutral, multi-factor investment strategy for New York Stock Exchange equities with the objective of delivering steady returns while minimizing correlation with the market. A robust feature set is…
The purpose of the present paper is to incorporate stochastic interest rates into a matrix-approach to multi-state life insurance, where formulas for reserves, moments of future payments and equivalence premiums can be obtained as explicit…
An efficient method to price bonds with optional sinking feature is presented. Such instruments equip their issuer with the option (but not the obligation) to redeem parts of the notional prior to maturity, therefore the future cash flows…
A regularized vector autoregressive hidden semi-Markov model is developed to analyze multivariate financial time series with switching data generating regimes. Furthermore, an augmented EM algorithm is proposed for parameter estimation by…
A new multi-factor short rate model is presented which is bounded from below by a real-valued function of time. The mean-reverting short rate process is modeled by a sum of pure-jump Ornstein--Uhlenbeck processes such that the related bond…
Financial markets are prominent examples for highly non-stationary systems. Sample averaged observables such as variances and correlation coefficients strongly depend on the time window in which they are evaluated. This implies severe…
Mean-variance analysis is widely used in portfolio management to identify the best portfolio that makes an optimal trade-off between expected return and volatility. Yet, this method has its limitations, notably its vulnerability to…