Related papers: An Empirical Implementation of the Shadow Riskless…

The efficiency of a modern economy depends on what we call the Value-Tracking Hypothesis: that market prices of key assets broadly track some underlying value. This can be expected if a sufficient weight of market participants are…

Stock prices are influenced over time by underlying macroeconomic factors. Jumping out of the box of conventional assumptions about the unpredictability of the market noise, we modeled the changes of stock prices over time through the…

We consider that the price of a firm follows a non linear stochastic delay differential equation. We also assume that any claim value whose value depends on firm value and time follows a non linear stochastic delay differential equation.…

Fractional Brownian motion with the Hurst parameter $H<\frac{1}{2}$ is used widely, for instance, to describe a 'rough' stochastic volatility process in finance. In this paper, we examine an Ait-Sahalia-type interest rate model driven by a…

Detecting changes in asset co-movements is of much importance to financial practitioners, with numerous risk management benefits arising from the timely detection of breakdowns in historical correlations. In this article, we propose a…

In finance, the price of a volatile asset can be modeled using fractional Brownian motion (fBm) with Hurst parameter $H>1/2.$ The Black-Scholes model for the values of returns of an asset using fBm is given as, [Y_t=Y_0…

Traditional machine learning methods have been widely studied in financial innovation. My study focuses on the application of deep learning methods on asset pricing. I investigate various deep learning methods for asset pricing, especially…

With the application of artificial intelligence in the financial field, quantitative trading is considered to be profitable. Based on this, this paper proposes an improved deep recurrent DRQN-ARBR model because the existing quantitative…

One the one hand, rough volatility has been shown to provide a consistent framework to capture the properties of stock price dynamics both under the historical measure and for pricing purposes. On the other hand, market price of volatility…

In this paper, we study a continuous time structural asset value model for two correlated firms using a two-dimensional Brownian motion. We consider the situation of incomplete information, where the information set available to the market…

We develop a robust framework for pricing and hedging of derivative securities in discrete-time financial markets. We consider markets with both dynamically and statically traded assets and make minimal measurability assumptions. We obtain…

Shadow prices are well understood and are widely used in economic applications. However, there are limits to where shadow prices can be applied assuming their natural interpretation and the fact that they reflect the first order optimality…

This study employs expected certainty equivalents to explore the reinsurance and investment issue pertaining to an insurer that aims to maximize the expected utility while being subject to random risk aversion. The insurer's surplus process…

Consider the motion of a Brownian particle in two or more dimensions, whose coordinate processes are standard Brownian motions with zero drift initially, and then at some random/unobservable time, one of the coordinate processes gets a…

We demonstrate that the processes underlying on-line auction price bids and many other longitudinal data can be represented by an empirical first order stochastic ordinary differential equation with time-varying coefficients and a smooth…

We begin by exploring the intuition of Brownian motion by explaining its birth through the observations of Robert Brown and later through Bachelier's work on its applications to the financial market and finally its rigorous and concretized…

We consider a structural stochastic volatility model for the loss from a large portfolio of credit risky assets. Both the asset value and the volatility processes are correlated through systemic Brownian motions, with default determined by…

Empirical rate-and-state friction laws are widely used in geophysics and engineering to simulate interface slip. They postulate that the friction coefficient depends on the local slip rate and a state variable that reflects the history of…

We consider an optimal investment and consumption problem for a Black-Scholes financial market with stochastic volatility and unknown stock appreciation rate. The volatility parameter is driven by an external economic factor modeled as a…

We present a new framework for Hermite fractional financial markets, generalizing the fractional Brownian motion and fractional Rosenblatt markets. Considering pure and mixed Hermite markets, we introduce a strategy-specific arbitrage tax…