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We detect the parameter sensitivities of bond pricing which is driven by a Brownian motion and a compound Poisson process as the discontinuous case in credit risk research. The strict mathematical deductions are given theoretically due to…
The recent financial crisis has led to so-called multi-curve models for the term structure. Here we study a multi-curve extension of short rate models where, in addition to the short rate itself, we introduce short rate spreads. In…
Exponential L\'evy processes can be used to model the evolution of various financial variables such as FX rates, stock prices, etc. Considerable efforts have been devoted to pricing derivatives written on underliers governed by such…
A small-time Edgeworth expansion of the density of an asset price is given under a general stochastic volatility model, from which asymptotic expansions of put option prices and at-the-money implied volatilities follow. A limit theorem for…
Pricing of high-dimensional options is one of the most important problems in Mathematical Finance. The objective of this manuscript is to present an original self-contained treatment of the multidimensional pricing. During the past decades…
The L\'evy, jumping process, defined in terms of the jumping size distribution and the waiting time distribution, is considered. The jumping rate depends on the process value. The fractional diffusion equation, which contains the variable…
The standard intensity-based approach for modeling defaults is generalized by making the deterministic term structure of the survival probability stochastic via a common jump process. The survival copula of the vector of default times is…
These lectures notes aim at introducing L\'{e}vy processes in an informal and intuitive way, accessible to non-specialists in the field. In the first part, we focus on the theory of L\'{e}vy processes. We analyze a `toy' example of a…
Nowadays many tools, e.g. fluctuation relations, are available to characterize the statistical properties of non-equilibrium systems. However, most of these tools rely on the assumption that the driving noise is normally distributed. Here…
The purpose of the article is twofold. Firstly, we review some recent results on the maximum likelihood estimation in the regression model of the form $X_t = \theta G(t) + B_t$, where $B$ is a Gaussian process, $G(t)$ is a known function,…
In a financial market, for agents with long investment horizons or at times of severe market stress, it is often changes in the asset price that act as the trigger for transactions or shifts in investment position. This suggests the use of…
The paper deals with the asymptotic behavior of the bridge of a Gaussian process conditioned to stay in $n$ fixed points at $n$ fixed past instants. In particular, functional large deviation results are stated for small time. Several…
We use standard physics techniques to model trading and price formation in a market under the assumption that order arrival and cancellations are Poisson random processes. This model makes testable predictions for the most basic properties…
In the analysis of highly-oscillatory evolution problems, it is commonly assumed that a single frequency is present and that it is either constant or, at least, bounded from below by a strictly positive constant uniformly in time. Allowing…
Scattering moments provide nonparametric models of random processes with stationary increments. They are expected values of random variables computed with a nonexpansive operator, obtained by iteratively applying wavelet transforms and…
In this paper we present new theoretical results on optimal estimation of certain random quantities based on high frequency observations of a L\'evy process. More specifically, we investigate the asymptotic theory for the conditional mean…
It is well known that the Black-Scholes-Merton model suffers from several deficiencies. Jump-diffusion and Levy models have been widely used to partially alleviate some of the biases inherent in this classical model. Unfortunately, the…
A considerable number of systems have recently been reported in which Brownian yet non-Gaussian dynamics was observed. These are processes characterised by a linear growth in time of the mean squared displacement, yet the probability…
The nonlinear response to an oscillating field is calculated for a kinetic trap model with an exponential density of states and the results are compared to those for the model with a Gaussian density of states. The calculations are limited…
We propose a novel diffusion-based generative framework for financial time series that incorporates geometric Brownian motion (GBM), the foundation of the Black--Scholes theory, into the forward noising process. Unlike standard score-based…