Related papers: Rough SABR Forward Market Model
This paper proposes a semiparametric stochastic volatility (SV) model that relaxes the restrictive Gaussian assumption in both the return and volatility error terms, allowing them to follow flexible, nonparametric distributions with…
The FitzHugh-Nagumo (FHN) model, from computational neuroscience, has attracted attention in nonlinear dynamics studies as it describes the behavior of excitable systems and exhibits interesting bifurcation properties. The accurate…
We consider an HJM model setting for Markov-chain modulated forward rates. The underlying Markov chain is assumed to induce regime switches on the forward curve dynamics. Our primary focus is on the interest rate and energy futures markets.…
We propose a new class of rough stochastic volatility models obtained by modulating the power-law kernel defining the fractional Brownian motion (fBm) by a logarithmic term, such that the kernel retains square integrability even in the…
We present a fast and robust calibration method for stochastic volatility models that admit Fourier-analytic transform-based pricing via characteristic functions. The design is structure-preserving: we keep the original pricing transform…
This paper explores stochastic modeling approaches to elucidate the intricate dynamics of stock prices and volatility in financial markets. Beginning with an overview of Brownian motion and its historical significance in finance, we delve…
We consider a class of stochastic processes with rough stochastic volatility, examples of which include the rough Bergomi and rough Stein-Stein model, that have gained considerable importance in quantitative finance. A basic question for…
We develop a product functional quantization of rough volatility. Since the quantizers can be computed offline, this new technique, built on the insightful works by Luschgy and Pages, becomes a strong competitor in the new arena of…
We develop robust pricing and hedging of a weighted variance swap when market prices for a finite number of co--maturing put options are given. We assume the given prices do not admit arbitrage and deduce no-arbitrage bounds on the weighted…
The two main approaches in credit risk are the structural approach pioneered in Merton (1974) and the reduced-form framework proposed in Jarrow & Turnbull (1995) and in Artzner & Delbaen (1995). The goal of this article is to provide a…
This paper presents a new model for options pricing. The Black-Scholes-Merton (BSM) model plays an important role in financial options pricing. However, the BSM model assumes that the risk-free interest rate, volatility, and equity premium…
We formulate a forward inflation index model with multi-factor volatility structure featuring a parametric form that allows calibration to correlations between indices of different tenors observed in the market. Assuming the nominal…
In this paper we apply Markovian approximation of the fractional Brownian motion (BM), known as the Dobric-Ojeda (DO) process, to the fractional stochastic volatility model where the instantaneous variance is modelled by a lognormal process…
Local Volatility (LV) is a powerful tool for market modeling, enabling the generation of arbitrage-free scenarios calibrated to all European options. To implement LV, we need to interpolate and extrapolate option prices. This approach is…
In this paper we propose a novel pricing-hedging framework for volatility derivatives which simultaneously takes into account rough volatility and volatility jumps. Our model directly targets the instantaneous variance of a risky asset and…
In order to study the geometry of interest rates market dynamics, Malliavin, Mancino and Recchioni [A non-parametric calibration of the HJM geometry: an application of It\^o calculus to financial statistics, {\it Japanese Journal of…
We consider rough stochastic volatility models where the variance process satisfies a stochastic Volterra equation with the fractional kernel, as in the rough Bergomi and the rough Heston model. In particular, the variance process is…
We study the pricing of European-style options written on forward contracts within function-valued infinite-dimensional affine stochastic volatility models. The dynamics of the underlying forward price curves are modeled within the…
In [Precise Asymptotics for Robust Stochastic Volatility Models; Ann. Appl. Probab. 2021] we introduce a new methodology to analyze large classes of (classical and rough) stochastic volatility models, with special regard to short-time and…
We provide a unified framework for modeling LIBOR rates using general semimartingales as driving processes and generic functional forms to describe the evolution of the dynamics. We derive sufficient conditions for the model to be…