Related papers: Signature-based models: theory and calibration
This paper is devoted to a study of robust fundamental theorems of asset pricing in discrete time and finite horizon settings. Uncertainty is modelled by a (possibly uncountable) family of price processes on the same probability space. Our…
We propose a new static parameterization of the implied volatility surface which is constructed by using polynomials of sigmoid functions combined with some other terms. This parameterization is flexible enough to fit market implied…
The Black-Litterman model is a framework for incorporating forward-looking expert views in a portfolio optimization problem. Existing work focuses almost exclusively on single-period problems with the forecast horizon matching that of the…
Motivated by the Corns-Satchell, continuous time, option pricing model, we develop a binary tree pricing model with underlying asset price dynamics following It\^o-Mckean skew Brownian motion. While the Corns-Satchell market model is…
Consistent Recalibration models (CRC) have been introduced to capture in necessary generality the dynamic features of term structures of derivatives' prices. Several approaches have been suggested to tackle this problem, but all of them,…
We develop theory and applications of forward characteristic processes in discrete time following a seminal paper of Jan Kallsen and Paul Kr\"uhner. Particular emphasis is placed on the dynamics of volatility surfaces which can be easily…
Financial market dynamics is rigorously studied via the exact generalized Langevin equation. Assuming market Brownian self-similarity, the market return rate memory and autocorrelation functions are derived, which exhibit an…
An agent-based modelling methodology for the joint price evolution of two stocks is put forward. The method models future multidimensional price trajectories reflecting how a class of agents rebalance their portfolios in an operational way…
In retrospect, the experimental findings on competitive market behavior called for a revival of the old, classical, view of competition as a collective higgling and bargaining process (as opposed to price-taking behaviors) founded on…
We consider a continuous-time financial market with no arbitrage and no transactions costs. In this setting, we introduce two types of perpetual contracts, one in which the payoff to the long side is a fixed function of the underlyers and…
We obtain option pricing formulas for stock price models in which the drift and volatility terms are functionals of a continuous history of the stock prices. That is, the stock dynamics follows a nonlinear stochastic functional differential…
In this paper we investigate general linear stochastic volatility models with correlated Brownian noises. In such models the asset price satisfies a linear SDE with coefficient of linearity being the volatility process. This class contains…
We show that, for the purpose of pricing Swaptions, the Swap rate and the corresponding Forward rates can be considered lognormal under a single martingale measure. Swaptions can then be priced as options on a basket of lognormal assets and…
Characteristic formulae give a complete logical description of the behaviour of processes modulo some chosen notion of behavioural semantics. They allow one to reduce equivalence or preorder checking to model checking, and are exactly the…
The aim of this work is to introduce a new stochastic volatility model for equity derivatives. To overcome some of the well-known problems of the Heston model, and more generally of the affine models, we define a new specification for the…
There is vast empirical evidence that given a set of assumptions on the real-world dynamics of an asset, the European options on this asset are not efficiently priced in options markets, giving rise to arbitrage opportunities. We study…
Signatures, one of the key concepts of rough path theory, have recently gained prominence as a means to find appropriate feature sets in machine learning systems. In this paper, in order to compute signatures directly from discrete data…
This paper formalizes a widely used dynamical class--replicator-mutator dynamics and Price-style selection-and-transmission--and makes explicit the modeling choices (scale, atomic unit, interaction topology, transmission kernel) that…
We consider a 2-dimensional marked Hawkes process with increasing baseline intensity in order to model prices on electricity intraday markets. This model allows to represent different empirical facts such as increasing market activity,…
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…