Related papers: Arbitrage-Free Pricing with Diffusion-Dependent Ju…
We develop a recursive approach for deriving closed-form solutions to both conditional and unconditional moments of affine jump diffusions with state-independent jump intensities. Using these moment solutions, we construct closed-form…
We present a detailed analysis and implementation of a splitting strategy to identify simultaneously the local-volatility surface and the jump-size distribution from quoted European prices. The underlying model consists of a jump-diffusion…
In this paper we introduce a simple continuous-time asset pricing framework, based on general multi-dimensional diffusion processes, that combines semi-analytic pricing with a nonlinear specification for the market price of risk. Our…
We present a data-driven framework to model the stochastic evolution of volume-price distribution from the New York Stock Exchange (NYSE) equities. The empirical distributions are sampled every 10 minutes over 976 trading days, and fitted…
We consider the pricing of American put options in a model-independent setting: that is, we do not assume that asset prices behave according to a given model, but aim to draw conclusions that hold in any model. We incorporate market…
Given an unconditional diffusion model targeting a joint model $\pi(x, y)$, using it to perform conditional simulation $\pi(x \mid y)$ is still largely an open question and is typically achieved by learning conditional drifts to the…
Safe and effective motion planning is crucial for autonomous robots. Diffusion models excel at capturing complex agent interactions, a fundamental aspect of decision-making in dynamic environments. Recent studies have successfully applied…
In this paper, we aim to develop the averaging principle for a slow-fast system of stochastic reaction-diffusion equations driven by Poisson random measures. The coefficients of the equation are assumed to be functions of time, and some of…
In stochastic volatility models based on time-homogeneous diffusions, we provide a simple necessary and sufficient condition for the discretely sampled fair strike of a variance swap to converge to the continuously sampled fair strike. It…
The denoising diffusion model has recently emerged as a powerful generative technique, capable of transforming noise into meaningful data. While theoretical convergence guarantees for diffusion models are well established when the target…
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…
In this paper, our focus lies on the Merton's jump diffusion model, employing jump processes characterized by the compound Poisson process. Our primary objective is to forecast the drift and volatility of the model using a variety 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…
We investigate the utility in employing asymptotic results related to a clustering criterion to the problem of testing for the presence of jumps in financial models. We consider the Jump Diffusion model for option pricing and demonstrate…
A standing assumption in the literature on proportional transaction costs is efficient friction. Together with robust no free lunch with vanishing risk, it rules out strategies of infinite variation, as they usually appear in frictionless…
We study a stochastic optimal control problem for jump-diffusion systems whose drift coefficient is piecewise Lipschitz continuous and exhibits threshold-induced discontinuities. Such dynamics naturally arise in applications with…
We prove a version of First Fundamental Theorem of Asset Pricing under transaction costs for discrete-time markets with dividend-paying securities. Specifically, we show that the no-arbitrage condition under the efficient friction…
The principle of absence of arbitrage opportunities allows obtaining the distribution of stock price fluctuations by maximizing its information entropy. This leads to a physical description of the underlying dynamics as a random walk…
Numerical experiments of the statistical evolution of an ensemble of non-interacting particles in a time-dependent billiard with inelastic collisions, reveals the existence of three statistical regimes for the evolution of the speeds…
We study some linear and nonlinear shot noise models where the jumps are drawn from a compound Poisson process with jump sizes following an Erlang-$m$ distribution. We show that the associated Master equation can be written as a spatial…