Related papers: Bond Market Completeness and Attainable Contingent…
A common assumption in financial engineering is that the market price for any derivative coincides with an objectively defined risk-neutral price - a plausible assumption only if traders collectively possess objective knowledge about the…
The folding entropy is a quantity originally proposed by Ruelle in 1996 during the study of entropy production in the non-equilibrium statistical mechanics. As derived through a limiting process to the non-equilibrium steady state, the…
Existence of solutions to the Heath-Jarrow-Morton equation of the bond market with linear volatility and general L\'evy random factor is studied. Conditions for existence and non-existence of solutions in the class of bounded fields are…
We perform a study on quantum entropy production, different kinds of correlations, and their interplay in the driven Caldeira-Leggett model of quantum Brownian motion. The model, taken with a large but finite number of bath modes, is…
We study the problem of optimally managing an inventory with unknown demand trend. Our formulation leads to a stochastic control problem under partial observation, in which a Brownian motion with non-observable drift can be singularly…
We find a simple expression for the probability density of $\int \exp (B_s - s/2) ds$ in terms of its distribution function and the distribution function for the time integral of $\exp (B_s + s/2)$. The relation is obtained with a change of…
We develop a unified analytical and computational framework for the generalized Abel ordinary differential equation $y^{\prime }(x)=a_n(x)\bigl(% y^n+\lambda_{n-1}(x)y^{n-1}+\dots+\lambda_0(x)\bigr)$ of arbitrary degree $% n\ge1$ on the…
This paper analyzes the pricing of collateralized derivatives, i.e. contracts where counterparties are not only subject to financial derivatives cash flows but also to collateral cash flows arising from a collateral agreement. We do this…
We consider a standard one-dimensional Brownian motion on the time interval $[0,1]$ conditioned to have vanishing iterated time integrals up to order $N$. We show that the resulting processes can be expressed explicitly in terms of shifted…
Rough volatility models are known to reproduce the behavior of historical volatility data while at the same time fitting the volatility surface remarkably well, with very few parameters. However, managing the risks of derivatives under…
We study contingent claims in a discrete-time market model where trading costs are given by convex functions and portfolios are constrained by convex sets. In addition to classical frictionless markets and markets with transaction costs or…
We analyze underdamped Brownian motion in non-isothermal media with quadratic, linear, and piecewise-constant temperature profiles. Exact identities for entropy production and entropy extraction are derived, addressing whether a vanishing…
We study fluctuations of entropy production for a charged Brownian particle confined in a harmonic trap and driven out of equilibrium by crossed electric and magnetic fields. The magnetic field is constant and perpendicular to the plane of…
We give a sufficient condition under which the time-marginal law of $\mu$-reversible infinite interacting Brownian motions is characterised as the steepest gradient descent of the relative entropy in the Wasserstein space in the sense of…
The key factor currently limiting the advancement of computational power of electronic computation is no longer the manufacturing density and speed of components, but rather their high energy consumption. While it has been widely argued…
The Geometric Brownian Motion (GBM) is a standard model in quantitative finance, but the potential function of its stochastic differential equation (SDE) cannot include stable nonzero prices. This article generalises the GBM to an SDE with…
The characterization of irreversibility in general quantum processes is an open problem of increasing techno- logical relevance. Yet, the tools currently available to this aim are mostly limited to the assessment of dynamics induced by…
This paper discusses and analyzes a class of likelihood models which are based on two distributional innovations in financial models for stock returns. That is, the notion that the marginal distribution of aggregate returns of log-stock…
We provide a complete representation of the interest rate in the extended CIR model. Since it was proved in Maghsoodi (1996) that the representation of the CIR process as a sum of squares of independent Ornstein-Uhlenbeck processes is…
In a model with no given probability measure, we consider asset pricing in the presence of frictions and other imperfections and characterize the property of coherent pricing, a notion related to (but much weaker than) the no arbitrage…