Related papers: Stochastic flows approach to Dupire's formula
We prove the existence of global-in-time regular solutions to a system of stochastic quadratic reaction-diffusion equations. Global-in-time existence is based on a $L^\infty$-estimate obtained by an approach {\`a} la De Giorgi, as in…
We consider the probabilistic numerical scheme for fully nonlinear PDEs suggested in \cite{cstv}, and show that it can be introduced naturally as a combination of Monte Carlo and finite differences scheme without appealing to the theory of…
In recent papers it has been noted that the local potential approximation of the Legendre and Wilson-Polchinski flow equations give, within numerical error, identical results for a range of exponents and Wilson-Fisher fixed points in three…
Stochastic differential equations (SDEs) on compact foliated spaces were introduced a few years ago. As a corollary, a leafwise Brownian motion on a compact foliated space was obtained as a solution to an SDE. In this paper we construct…
We establish It\^o's formula along flows of probability measures associated with general semimartingales; this generalizes existing results for flows of measures on It\^o processes. Our approach is to first establish It\^o's formula for…
We prove two duality descriptions of the value function for a generic stochastic optimal problem. These descriptions also hold when the diffusion is controlled, a case left open by the literature so far.
This paper derives stochastic partial differential equations (SPDEs) for fluid dynamics from a stochastic variational principle (SVP). The Legendre transform of the Lagrangian formulation of these SPDEs yields their Lie-Poisson Hamiltonian…
We take a new look at the problem of disentangling the volatility and jumps processes of daily stock returns. We first provide a computational framework for the univariate stochastic volatility model with Poisson-driven jumps that offers a…
We regard options on VIX and Realised Variance as solutions to path-dependent partial differential equations (PDEs) in a continuous stochastic volatility model. The modeling assumption specifies that the instantaneous variance is a $C^3$…
The problem of the construction of strong approximations with a given order of convergence for jump-diffusion equations is studied. General approximation schemes are constructed for L\'evy type stochastic differential equation. In…
Techniques from numerical bifurcation theory are very useful to study transitions between steady fluid flow patterns and the instabilities involved. Here, we provide computational methodology to use parameter continuation in determining…
Duality relations between continuous-state and discrete-state stochastic processes with continuous-time have already been studied and used in various research fields. We propose extended duality relations, which enable us to derive…
We investigate stochastic differential equations with jumps and irregular coefficients, and obtain the existence and uniqueness of generalized stochastic flows. Moreover, we also prove the existence and uniqueness of $L^p$-solutions or…
Fluid queues are mathematical models frequently used in stochastic modelling. Their stationary distributions involve a key matrix recording the conditional probabilities of returning to an initial level from above, often known in the…
We obtain a decomposition of the call option price for a very general stochastic volatility diffusion model extending the decomposition obtained by E. Al\`os in [2] for the Heston model. We realize that a new term arises when the stock…
Using spectral decomposition techniques and singular perturbation theory, we develop a systematic method to approximate the prices of a variety of options in a fast mean-reverting stochastic volatility setting. Four examples are provided in…
We derive sufficient conditions for the differentiability of all orders for the flow of stochastic differential equations with jumps, and prove related $L^p$-integrability results for all orders. Our results extend similar results obtained…
We consider a method of lines (MOL) approach to determine prices of European and American exchange options when underlying asset prices are modelled with stochastic volatility and jump-diffusion dynamics. As the MOL, as with any other…
We present a path integral method to derive closed-form solutions for option prices in a stochastic volatility model. The method is explained in detail for the pricing of a plain vanilla option. The flexibility of our approach is…
Speculative optimisation relies on the estimation of the probabilities that certain properties of the control flow are fulfilled. Concrete or estimated branch probabilities can be used for searching and constructing advantageous speculative…