Related papers: Filtration Reduction and Completeness in Jump-Diff…
This research investigates liquidity dynamics in fractional ownership markets, focusing on illiquid alternative investments traded on a FinTech platform. By leveraging empirical data and employing agent-based modeling (ABM), the study…
We propose a model for hedging in a market with jumps for a large investor. The dynamics of the stock prices and the value process is governed by forward-backward SDEs driven by Teugels martingales. Unlike known FBSDE market models, ours…
This paper tackles challenges in pricing and revenue projections due to consumer uncertainty. We propose a novel data-based approach for firms facing unknown consumer type distributions. Unlike existing methods, we assume firms only observe…
This paper presents a tractable sufficient condition for the consistency of maximum likelihood estimators (MLEs) in partially observed diffusion models, stated in terms of stationary distribution of the associated fully observed diffusion,…
In a mixture of linear regression model, the regression coefficients are treated as random vectors that may follow either a continuous or discrete distribution. We propose two Expectation-Maximization (EM) algorithms to estimate this prior…
We present a perturbation theory of the market impact based on an extension of the framework proposed by [Loeper, 2018] -- originally based on [Liu and Yong, 2005] -- in which we consider only local linear market impact. We study the…
This paper is a further extension of the method proposed in Itkin, 2014 as applied to another set of jump-diffusion models: Inverse Normal Gaussian, Hyperbolic and Meixner. To solve the corresponding PIDEs we accomplish few steps. First, a…
In mathematical finance a popular approach for pricing options under some Levy model is to consider underlying that follows a Poisson jump diffusion process. As it is well known this results in a partial integro-differential equation (PIDE)…
The paper presents error estimates within a unified abstract framework for the analysis of FEM for boundary value problems with linear diffusion-convection-reaction equations and boundary conditions of mixed type. Since neither conformity…
We develop the first exact Bayesian methodology for the problem of inference in discretely observed regime switching diffusions. Switching diffusion models extend ordinary diffusions by allowing for jumps in instantaneous drift and…
We price European and American exchange options where the underlying asset prices are modelled using a Merton (1976) jump-diffusion with a common Heston (1993) stochastic volatility process. Pricing is performed under an equivalent…
While diffusion models can learn complex distributions, sampling requires a computationally expensive iterative process. Existing distillation methods enable efficient sampling, but have notable limitations, such as performance degradation…
We consider the mean-variance hedging problem under partial information in the case where the flow of observable events does not contain the full information on the underlying asset price process. We introduce a martingale equation of a new…
This article clarifies the relationship between pricing kernel monotonicity and the existence of opportunities for stochastic arbitrage in a complete and frictionless market of derivative securities written on a market portfolio. The…
Prediction markets allow traders to bet on potential future outcomes. These markets exist for weather, political, sports, and economic forecasting. Within this work we consider a decentralized framework for prediction markets using…
We consider fundamental questions of arbitrage pricing arising when the uncertainty model is given by a set of possible mutually singular probability measures. With a single probability model, essential equivalence between the absence of…
In this paper we study the pricing and hedging of nonreplicable contingent claims, such as long-term insurance contracts like variable annuities. Our approach is based on the benchmark-neutral pricing framework of Platen (2024), which…
This paper conducts an empirical investigation into the effects of Designated Market Makers (DMMs) on key market quality indicators, such as liquidity, bid-ask spreads, and order fulfillment ratios. Through agent-based simulations, this…
This paper includes an original self contained proof of well-posedness of an initial-boundary value problem involving a non-local parabolic PDE which naturally arises in the study of derivative pricing in a generalized market model. We call…
We consider a time-consistent mean-variance portfolio selection problem of an insurer and allow for the incorporation of basis (mortality) risk. The optimal solution is identified with a Nash subgame perfect equilibrium. We characterize an…