相关论文: Construction of Martingale Measure in the Hazard P…

We develop a model for credit rating migration that accounts for the impact of economic state fluctuations on default probabilities. The joint process for the economic state and the rating is modelled as a time-homogeneous Markov chain.…

We consider fundamental questions of arbitrage pricing arising when the uncertainty model is given by a set of possible mutually singular probability measures. With a single probability model, essential equivalence between the absence of…

Invariance times are stopping times $\tau$ such that local martingales with respect to some reduced filtration and an equivalently changed probability measure, stopped before $\tau$ , are local martingales with respect to the original model…

We show that the martingale component in the long-term factorization of the stochastic discount factor due to Alvarez and Jermann (2005) and Hansen and Scheinkman (2009) is highly volatile, produces a downward-sloping term structure of bond…

In this letter, I consider the issue of pricing risky debt by following Merton's approach. I generalize Merton's results to the case where the interest rate is modeled by the CIR term structure. Exact closed forms are provided for the risky…

We consider a change of measure by a martingale $Z_t$ and clarify that in general $1/Z_t$ is only a supermartingale under the changed measure. We then give a necessary and sufficient condition for the event that the limit of the martingale…

We establish a practical and easy-to-implement sequential stopping rule for the martingale central limit theorem, focusing on Monte Carlo methods for estimating the mean of a non-iid sequence of martingale difference type. Starting with an…

In the context of jump-diffusion market models we construct examples that satisfy the weaker no-arbitrage condition of NA1 (NUPBR), but not NFLVR. We show that in these examples the only candidate for the density process of an equivalent…

We propose a method to assess the intrinsic risk carried by a financial position $X$ when the agent faces uncertainty about the pricing rule assigning its present value. Our approach is inspired by a new interpretation of the quasiconvex…

In this study we prove the existence of statistical arbitrage opportunities in the Black-Scholes framework by considering trading strategies that consists of borrowing from the risk free rate and taking a long position in the stock until it…

In this work, we identify the most general measure of arbitrage for any market model governed by It\^o processes. We show that our arbitrage measure is invariant under changes of num\'{e}raire and equivalent probability. Moreover, such…

Strict local martingales may admit arbitrage opportunities with respect to the class of simple trading strategies. (Since there is no possibility of using doubling strategies in this framework, the losses are not assumed to be bounded from…

In a Monte-Carlo test, the observed dataset is fixed, and several resampled or permuted versions of the dataset are generated in order to test a null hypothesis that the original dataset is exchangeable with the resampled/permuted ones.…

We develop a model for the dynamic evolution of default-free and defaultable interest rates in a LIBOR framework. Utilizing the class of affine processes, this model produces positive LIBOR rates and spreads, while the dynamics are…

This article proposes a method for measuring the latent risks involved in the recovery process of non performing loans in financial institutions and business firms that deal with collection and recovery processes. To that end, we apply the…

This paper introduces a relative model risk measure of a product priced with a given model, with respect to another reference model for which the market is assumed to be driven. This measure allows comparing products valued with different…

A discretization scheme for nonnegative diffusion processes is proposed and the convergence of the corresponding sequence of approximate processes is proved using the martingale problem framework. Motivations for this scheme come typically…

We find the variance-optimal equivalent martingale measure when multivariate assets are modeled by a regime-switching geometric Brownian motion, and the regimes are represented by a homogeneous continuous time Markov chain. Under this new…

This paper addresses risk awareness of stochastic optimization problems. Nested risk measures appear naturally in this context, as they allow beneficial reformulations for algorithmic treatments. The reformulations presented extend usual…

We construct a data-driven statistical indicator for quantifying the tail risk perceived by the EURGBP option market surrounding Brexit-related events. We show that under lognormal SABR dynamics this tail risk is closely related to the…