arXiv research

In this paper we study time-inhomogeneous affine processes beyond the common assumption of stochastic continuity. In this setting times of jumps can be both inaccessible and predictable. To this end we develop a general theory of finite dimensional affine semimartingales under very weak assumptions. We show that the co…

This thesis is devoted to the study of affine processes and their applications in financial mathematics. In the first part we consider the theory of time-inhomogeneous affine processes on general state spaces. We present a concise setup for time-inhomogeneous Markov processes. For stochastically continuous affine proce…

We provide a new proof for regularity of affine processes on general state spaces by methods from the theory of Markovian semimartingales. On the way to this result we also show that the definition of an affine process, namely as stochastically continuous time-homogeneous Markov process with exponential affine Fourier-…

We propose a general framework for modeling multiple yield curves which have emerged after the last financial crisis. In a general semimartingale setting, we provide an HJM approach to model the term structure of multiplicative spreads between FRA rates and simply compounded OIS risk-free forward rates. We derive an HJ…

This work models overnight rates with jumps and discontinuities, extending classical short-rate models.

In a financial market model, we consider the variance-optimal semi-static hedging of a given contingent claim, a generalization of the classic variance-optimal hedging. To obtain a tractable formula for the expected squared hedging error and the optimal hedging strategy, we use a Fourier approach in a general multidime…

We develop a comprehensive mathematical framework for polynomial jump-diffusions in a semimartingale context, which nest affine jump-diffusions and have broad applications in finance. We show that the polynomial property is preserved under polynomial transformations and Lévy time change. We present a generic method for…

Paper solves Merton's portfolio problem in a non-Markovian, non-semimartingale model.

The paper studies horizontal semimartingales on Riemannian manifolds and their connections to Euclidean spaces.

Unified framework models multiple financial and insurance term structures.

We consider a stochastic factor financial model where the asset price process and the process for the stochastic factor depend on an observable Markov chain and exhibit an affine structure. We are faced with a finite time investment horizon and derive optimal dynamic investment strategies that maximize the investor's e…

Simplified calculus for semimartingales makes complex transformations easier.

Paper investigates existence of deflators in financial markets.

This paper extends Markovian projections to semimartingales with jumps.

This paper optimizes portfolio selection for multivariate affine and quadratic Volterra models with rough volatilities.

Investigates mean-variance portfolio selection in non-Markovian markets.

Study forward investment performance in semimartingale markets with stochastic factors.

Projects Markovian processes from Itô semimartingales with jumps.

We study the short-time asymptotics of conditional expectations of smooth and non-smooth functions of a (discontinuous) Ito semimartingale; we compute the leading term in the asymptotics in terms of the local characteristics of the semimartingale. We derive in particular the asymptotic behavior of call options with sho…

We provide a unified framework for modeling LIBOR rates using general semimartingales as driving processes and generic functional forms to describe the evolution of the dynamics. We derive sufficient conditions for the model to be arbitrage-free which are easily verifiable, and for the LIBOR rates to be true martingale…

New theorem handles stochastic Volterra semimartingales.

We develop a general term structure framework taking stochastic discontinuities explicitly into account. Stochastic discontinuities are a key feature in interest rate markets, as for example the jumps of the term structures in correspondence to monetary policy meetings of the ECB show. We provide a general analysis of …

In a general semimartingale financial model, we study the stability of the No Arbitrage of the First Kind (NA1) (or, equivalently, No Unbounded Profit with Bounded Risk) condition under initial and under progressive filtration enlargements. In both cases, we provide a simple and general condition which is sufficient to…

We give a collection of explicit sufficient conditions for the true martingale property of a wide class of exponentials of semimartingales. We express the conditions in terms of semimartingale characteristics. This turns out to be very convenient in financial modeling in general. Especially it allows us to carefully di…

The paper simplifies calculus for semimartingales using multiplicative compensation.

No arbitrage in financial markets with special semimartingales.

In quantitative finance, we often fit a parametric semimartingale model to asset prices. To ensure our model is correct, we must then perform goodness-of-fit tests. In this paper, we give a new goodness-of-fit test for volatility-like processes, which is easily applied to a variety of semimartingale models. In each cas…

Study robust utility maximization with uncertain continuous semimartingales.

In a recent work \cite{BG}, given a collection of continuous semimartingales, authors derive a semimartingale decomposition from the corresponding ranked processes in the case that the ranked processes can meet more than two original processes at the same time. This has led to a more general decomposition of ranked pro…

Unified framework for optimal liquidation with small market impact and semimartingale strategies.

A wealth-process set is abstractly defined to consist of nonnegative càdlàg processes containing a strictly positive semimartingale and satisfying an intuitive re-balancing property. Under the condition of absence of arbitrage of the first kind, it is established that all wealth processes are semimartingales and that t…

Existence of stochastic financial equilibria giving rise to semimartingale asset prices is established under a general class of assumptions. These equilibria are expressed in real terms and span complete markets or markets with withdrawal constraints.We deal with random endowment density streams which admit jumps and g…

In this work, we develop a novel principal component analysis (PCA) for semimartingales by introducing a suitable spectral analysis for the quadratic variation operator. Motivated by high-dimensional complex systems typically found in interest rate markets, we investigate correlation in high-dimensional high-frequency …

While absence of arbitrage in frictionless financial markets requires price processes to be semimartingales, non-semimartingales can be used to model prices in an arbitrage-free way, if proportional transaction costs are taken into account. In this paper, we show, for a class of price processes which are not necessaril…

New results on financial equilibria in markets with general semimartingales.

We present an elementary treatment of the Optional Decomposition Theorem for continuous semimartingales and general filtrations. This treatment does not assume the existence of equivalent local martingale measure(s), only that of strictly positive local martingale deflator(s).

A financial market model where agents trade using realistic combinations of buy-and-hold strategies is considered. Minimal assumptions are made on the discounted asset-price process - in particular, the semimartingale property is not assumed. Via a natural market viability assumption, namely, absence of arbitrages of t…

Time homogeneous polynomial processes are Markov processes whose moments can be calculated easily through matrix exponentials. In this work, we develop a notion of time inhomogeneous polynomial processes where the coeffiecients of the process may depend on time. A full characterization of this model class is given by m…

The paper revisits expected signatures in semimartingale models, providing new formulae and simplifying complexity.

Extends credit risky bond market models to include jumps and general semimartingales.

Paper approximates rough stochastic local volatility models for efficient computation.

Suppose that $X_1, \ldots , X_n$ are continuous semimartingales that are reversible and have nondegenerate crossings. Then the corresponding rank processes can be represented by generalized Stratonovich integrals, and this representation can be used to decompose the relative log-return of portfolios generated by functi…

Constructs rank-based continuous semimartingales for financial markets.

We derive asymptotic expansions for option data to detect infinite variation volatility.

The purpose of this paper is two-fold. First is to extend the notions of an n-dimensional semimartingale and its stochastic integral to a piecewise semimartingale of stochastic dimension. The properties of the former carry over largely intact to the latter, avoiding some of the pitfalls of infinite-dimensional stochast…

For utility functions $u$ finite valued on $\mathbb{R}$, we prove a duality formula for utility maximization with random endowment in general semimartingale incomplete markets. The main novelty of the paper is that possibly non locally bounded semimartingale price processes are allowed. Following Biagini and Frittelli …

We derive a forward partial integro-differential equation for prices of call options in a model where the dynamics of the underlying asset under the pricing measure is described by a -possibly discontinuous- semimartingale. A uniqueness theorem is given for the solutions of this equation. This result generalizes Dupire…

Given a finite honest time, we first show that the associated Azéma optional supermartingale can be expressed as the drawdown and the relative drawdown of some local optional supermartingales with continuous running supremum. The relative drawdown representation then allows us to provide a characterisation of finite ho…