Related papers: Filtration Reduction and Completeness in Jump-Diff…
Existence of stochastic financial equilibria giving rise to semimartingale asset prices is established under a general class of assumptions. These equilibria are expressed in real terms and span complete markets or markets with withdrawal…
This paper studies the equal risk pricing (ERP) framework for the valuation of European financial derivatives. This option pricing approach is consistent with global trading strategies by setting the premium as the value such that the…
The proposed model modifies option pricing formulas for the basic case of log-normal probability distribution providing correspondence to formulated criteria of efficiency and completeness. The model is self-calibrating by historic…
We develop the mathematics of a filtration shrinkage model that has recently been considered in the credit risk modeling literature. Given a finite collection of points $x_1<...<x_N$ in $\mathbb{R}$, the region indicator function $R(x)$…
Expectation-Maximization (EM) is a prominent approach for parameter estimation of hidden (aka latent) variable models. Given the full batch of data, EM forms an upper-bound of the negative log-likelihood of the model at each iteration and…
The embedded topic model (ETM) is a widely used approach that assumes the sampled document-topic distribution conforms to the logistic normal distribution for easier optimization. However, this assumption oversimplifies the real…
Matching markets are of particular interest in computer science and economics literature as they are often used to model real-world phenomena where we aim to equitably distribute a limited amount of resources to multiple agents and…
Diffusion models excel in solving imaging inverse problems due to their ability to model complex image priors. However, their reliance on large, clean datasets for training limits their practical use where clean data is scarce. In this…
In this paper we study the pricing and hedging of structured products in energy markets, such as swing and virtual gas storage, using the exponential utility indifference pricing approach in a general incomplete multivariate market model…
We introduce and discuss a general criterion for the derivative pricing in the general situation of incomplete markets, we refer to it as the No Almost Sure Arbitrage Principle. This approach is based on the theory of optimal strategy in…
In this paper we show how to approximate a Heath-Jarrow-Morton dynamics for the forward prices in commodity markets with arbitrage-free models which have a finite dimensional state space. Moreover, we recover a closed form representation of…
Most energy and commodity markets exhibit mean-reversion and occasional distinctive price spikes, which results in demand for derivative products which protect the holder against high prices. To this end, in this paper we present exact and…
We discuss utility based pricing and hedging of jump diffusion processes with emphasis on the practical applicability of the framework. We point out two difficulties that seem to limit this applicability, namely drift dependence and…
In general it is not clear which kind of information is supposed to be used for calculating the fair value of a contingent claim. Even if the information is specified, it is not guaranteed that the fair value is uniquely determined by the…
We derived similar to Bo et al. (2010) results but in the case when the dynamics of the FX rate is driven by a general Merton jump-diffusion process. The main results of our paper are as follows: 1) formulas for the Esscher transform…
We discuss martingales, detrending data, and the efficient market hypothesis for stochastic processes x(t) with arbitrary diffusion coefficients D(x,t). Beginning with x-independent drift coefficients R(t) we show that Martingale stochastic…
The Empirical Revenue Maximization (ERM) is one of the most important price learning algorithms in auction design: as the literature shows it can learn approximately optimal reserve prices for revenue-maximizing auctioneers in both repeated…
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…
Mixture modelling using elliptical distributions promises enhanced robustness, flexibility and stability over the widely employed Gaussian mixture model (GMM). However, existing studies based on the elliptical mixture model (EMM) are…
Given the univariate marginals of a real-valued, continuous-time martingale, (respectively, a family of measures parameterised by $t \in [0,T]$ which is increasing in convex order, or a double continuum of call prices) we construct a family…