A locally-built, LLM-digested index of recent arXiv papers in quant finance, geometry/topology, and statistical ML — keyword search served straight from SQLite on this machine.
Modeling Bitcoin prices and media attention using jump-type processes.
Method extracts stochastic systems with Lévy noise from data.
This work extracts stochastic dynamical systems with -stable Lévy noise.
Study values American passport options in an exponential Lévy model.
We focus on the topology and dynamics of minimal sets and Levi-flats in surfaces of general type. Our method relies on the ergodic theory of Riemann surfaces laminations: we use harmonic measures and Lyapunov exponents. Our first result establishes that minimal sets have large Hausdorff dimension when a leaf is simply …
The paper develops a valuation framework for GLWB-LTC contracts with Levy dynamics and stochastic interest rates.
The paper prices weather contracts using a complex temperature model.
Method extracts governing laws from non-Gaussian stochastic systems data.
New method extracts stochastic laws from data, including Lévy noise.
New method handles complex systems with discontinuous, heavy-tailed noise.
Method extends option valuation for 2D Lévy models.
The LIBOR market model is very popular for pricing interest rate derivatives, but is known to have several pitfalls. In addition, if the model is driven by a jump process, then the complexity of the drift term is growing exponentially fast (as a function of the tenor length). In this work, we consider a Lévy-driven LIB…
In this paper we prove the following theorem. Main Theorem. Let n >= 3 and m >= 3n/2 +7. Then there exists no C^m Levi-flat real hypersurface M in P_n. The condition that M is Levi-flat means that when M is locally defined by the vanishing of a C^m real-valued function f, at every point of M the restriction of d d-bar …
Paper proves existence and uniqueness of solutions to PIDEs in Bessel spaces for option pricing.
Extends option pricing framework without risk-free asset using Levy jumps.
In recent studies the truncated Levy process (TLP) has been shown to be very promising for the modeling of financial dynamics. In contrast to the Levy process, the TLP has finite moments and can account for both the previously observed excess kurtosis at short timescales, along with the slow convergence to Gaussian at …
Develops new approach to recover CR structures from their Levi foliations.
New financial models use tempered stable subordination for better correlation dynamics.
Financial time series typically exhibit strong fluctuations that cannot be described by a Gaussian distribution. In recent empirical studies of stock market indices it was examined whether the distribution P(r) of returns r(tau) after some time tau can be described by a (truncated) Levy-stable distribution L_{alpha}(r)…
The paper uses moment matching method for pricing spread options under Lévy models.
The paper defines and analyzes set-valued stochastic integrals for Lévy processes.
This review deals with several microscopic (``agent-based'') models of financial markets which have been studied by economists and physicists over the last decade: Kim-Markowitz, Levy-Levy-Solomon, Cont-Bouchaud, Solomon-Weisbuch, Lux-Marchesi, Donangelo-Sneppen and Solomon-Levy-Huang. After an overview of simulation a…
It is essential to incorporate the impact of investor behavior when modeling the dynamics of asset returns. In this paper, we reconcile behavioral finance and rational finance by incorporating investor behavior within the framework of dynamic asset pricing theory. To include the views of investors, we employ the method…
In this work, we study the value of an Asian option in the case of exponential Levy markets. More specifically, we are interested in the NIG (normal inverse Gaussian) the VG (variance gamma) models. The exponential Levy models produce incomplete markets. There are therefore an infinite number of equivalent martingale m…
Modeling financial market dynamics with 2D Levy flights.
A market with defaultable bonds where the bond dynamics is in a Heath-Jarrow-Morton setting and the forward rates are driven by an infinite number of Levy factors is considered. The setting includes rating migrations driven by a Markov chain. All basic types of recovery are investigated. We formulate necessary and suff…
New method for Bayesian inference of Lévy-driven SDEs with jumps.
Develops a new method to discover stochastic systems with non-Gaussian noise.
We construct continuous-time equilibrium models based on a finite number of exponential utility investors. The investors' income rates as well as the stock's dividend rate are governed by discontinuous Levy processes. Our main result provides the equilibrium (i.e., bond and stock price dynamics) in closed-form. As an a…
We consider a defaultable asset whose risk-neutral pricing dynamics are described by an exponential Lévy-type martingale. This class of models allows for a local volatility, local default intensity and a locally dependent Lévy measure. We present a pricing method for Bermudan options based on an analytical approximatio…
Study improves parameter estimation for SDEs driven by Levy noise.
We consider a class of assets whose risk-neutral pricing dynamics are described by an exponential Lévy-type process subject to default. The class of processes we consider features locally-dependent drift, diffusion and default-intensity as well as a locally-dependent Lévy measure. Using techniques from regular perturba…
Develops a new model for multi-currency volatility using CBI-time-changed Lévy processes.
We study the forward price dynamics in commodity markets realized as a process with values in a Hilbert space of absolutely continuous functions defined by Filipović. The forward dynamics are defined as the mild solution of a certain stochastic partial differential equation driven by an infinite dimensional Lévy proces…
This paper explains how predictable order flow can lead to Brownian motion in financial prices.
NBE method speeds up Lévy process parameter estimation.
This research develops an evolutionary approach to discover non-Gaussian stochastic dynamical systems.
A hybrid framework uses machine learning to price options faster and more accurately.
Various valuation adjustments, or XVAs, can be written in terms of non-linear PIDEs equivalent to FBSDEs. In this paper we develop a Fourier-based method for solving FBSDEs in order to efficiently and accurately price Bermudan derivatives, including options and swaptions, with XVA under the flexible dynamics of a local…
Proposes second-order Esscher transform for Lévy models in financial markets.
New simulation technique speeds up Lévy-driven OU process pricing.
We study how the presence of correlations in physical variables contributes to the form of probability distributions. We investigate a process with correlations in the variance generated by (i) a Gaussian or (ii) a truncated Lévy distribution. For both (i) and (ii), we find that due to the correlations in the variance,…
We consider the problem of valuing a European option written on an asset whose dynamics are described by an exponential Lévy-type model. In our framework, both the volatility and jump-intensity are allowed to vary stochastically in time through common driving factors -- one fast-varying and one slow-varying. Using Four…
We consider a defaultable asset whose risk-neutral pricing dynamics are described by an exponential Levy-type martingale subject to default. This class of models allows for local volatility, local default intensity, and a locally dependent Levy measure. Generalizing and extending the novel adjoint expansion technique o…
The goal of this paper is to specify dynamic term structure models with discrete tenor structure for credit portfolios in a top-down setting driven by time-inhomogeneous Lévy processes. We provide a new framework, conditions for absence of arbitrage, explicit examples, an affine setup which includes contagion and prici…
The present article deals with intra-horizon risk in models with jumps. Our general understanding of intra-horizon risk is along the lines of the approach taken in Boudoukh, Richardson, Stanton and Whitelaw (2004), Rossello (2008), Bhattacharyya, Misra and Kodase (2009), Bakshi and Panayotov (2010), and Leippold and Va…
We study valuation of swing options on commodity markets when the commodity prices are driven by multiple factors. The factors are modeled as diffusion processes driven by a multidimensional Lévy process. We set up a valuation model in terms of a dynamic programming problem where the option can be exercised continuousl…
The geometric Lévy model (GLM) is a natural generalisation of the geometric Brownian motion model (GBM) used in the derivation of the Black-Scholes formula. The theory of such models simplifies considerably if one takes a pricing kernel approach. In one dimension, once the underlying Lévy process has been specified, th…