Related papers: Risk-Neutral Market Simulation
The general method is proposed for constructing a family of martingale measures for a wide class of evolution of risky assets. The sufficient conditions are formulated for the evolution of risky assets under which the family of equivalent…
We construct a binary market model with memory that approximates a continuous-time market model driven by a Gaussian process equivalent to Brownian motion. We give a sufficient conditions for the binary market to be arbitrage-free. In a…
In the context of Risk Neutral Pricing theory, we consider the classic problem of calibrating a martingale over $\mathbb{R}^n$ to a finite number of marginals thereof, or more practically, to prices of an arbitrary finite set of (joint)…
We study the minimax estimation of $\alpha$-divergences between discrete distributions for integer $\alpha\ge 1$, which include the Kullback--Leibler divergence and the $\chi^2$-divergences as special examples. Dropping the usual…
In an observed generalized semi-Markov regime, estimation of transition rate of regime switching leads towards calculation of locally risk minimizing option price. Despite the uniform convergence of estimated step function of transition…
Recurring international financial crises have adverse socioeconomic effects and demand novel regulatory instruments or strategies for risk management and market stabilization. However, the complex web of market interactions often impedes…
High-fidelity, scalable market simulation is a key instrument for mechanism evaluation, stress testing, and counterfactual policy analysis. Yet existing simulators rarely achieve \emph{mechanism fidelity} beyond single-asset intraday…
Starting from the observation of the real trading activity, we propose a model of a stockmarket simulating all the typical phases taking place in a stock exchange. We show that there is no need of several classes of agents once one has…
In this paper, we consider estimating spot/instantaneous volatility matrices of high-frequency data collected for a large number of assets. We first combine classic nonparametric kernel-based smoothing with a generalised shrinkage technique…
This paper develops a flexible and computationally efficient multivariate volatility model, which allows for dynamic conditional correlations and volatility spillover effects among financial assets. The new model has desirable properties…
Pricing financial derivatives, in particular European-style options at different time-maturities and strikes, means a relevant problem in finance. The dynamics describing the price of vanilla options when constant volatilities and interest…
The paper studies an oligopolistic equilibrium model of financial agents who aim to share their random endowments. The risk-sharing securities and their prices are endogenously determined as the outcome of a strategic game played among all…
In this paper we consider a method of solving optimal stopping problems in discrete and continuous time based on their dual representation. A novel and generic simulation-based optimization algorithm not involving nested simulations is…
Realised pay-offs for discretisation-invariant swaps are those which satisfy a restricted `aggregation property' of Neuberger [2012] for twice continuously differentiable deterministic functions of a multivariate martingale. They are…
This study investigates the prevention of market manipulation using a price-impact model of financial market trading as a linear system. First, I define a trading game between speculators such that they implement a manipulation trading…
We design a prediction market to recover a complete and fully general probability distribution over a random variable. Traders buy and sell interval securities that pay \$1 if the outcome falls into an interval and \$0 otherwise. Our market…
We consider a market consisting of one safe and one risky asset, which offer constant investment opportunities. Taking into account both proportional transaction costs and linear price impact, we derive optimal rebalancing policies for…
We design three continuous--time models in finite horizon of a commodity price, whose dynamics can be affected by the actions of a representative risk--neutral producer and a representative risk--neutral trader. Depending on the model, the…
The dynamics of financial markets are driven by the interactions between participants, as well as the trading mechanisms and regulatory frameworks that govern these interactions. Decision-makers would rather not ignore the impact of other…
We consider a one-period market model composed by a risk-free asset and a risky asset with $n$ possible future values (namely, a $n$-nomial market model). We characterize the lower envelope of the class of equivalent martingale measures in…