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.
New method quantifies co-jumps' impact on currency market correlations.
Extends local stochastic volatility models with stochastic interest rates and correlated jumps.
Study proposes pricing mechanism for cryptocurrency options.
Optimizes dynamic investment portfolios with correlated jumps.
Continuous time random walks impose a random waiting time before each particle jump. Scaling limits of heavy tailed continuous time random walks are governed by fractional evolution equations. Space-fractional derivatives describe heavy tailed jumps, and the time-fractional version codes heavy tailed waiting times. Thi…
The paper models FX option skew using SLV models with stochastic correlation and jumps.
Study reveals strong co-jumping behavior in U.S. yield curves compared to Europe.
Derives a series expansion for Asian option pricing with polynomial jump-diffusion moments.
In order to understand the origin of stock price jumps, we cross-correlate high-frequency time series of stock returns with different news feeds. We find that neither idiosyncratic news nor market wide news can explain the frequency and amplitude of price jumps. We find that the volatility patterns around jumps and aro…
Formula for computing cross-moments of polynomial processes.
Modeling cryptocurrency volatility and jumps with SVCJ model.
Study shows how crypto asset liquidity is affected by wash trading and proposes treatment to reduce liquidity diffusion.
Unified kernel for prediction markets reduces belief variance forecast error.
In this paper we discuss the basket options valuation for a jump-diffusion model. The underlying asset prices follow some correlated local volatility diffusion processes with systematic jumps. We derive a forward partial integral differential equation (PIDE) for general stochastic processes and use the asymptotic expan…
The downside risk of a portfolio of (equity)assets is generally substantially higher than the downside risk of its components. In particular in times of crises when assets tend to have high correlation, the understanding of this difference can be crucial in managing systemic risk of a portfolio. In this paper we genera…
This paper examines the problem of pricing spread options under some models with jumps driven by Compound Poisson Processes and stochastic volatilities in the form of Cox-Ingersoll-Ross(CIR) processes. We derive the characteristic function for two market models featuring joint normally distributed jumps, stochastic vol…
This paper explores integration and contagion among US metropolitan housing markets. The analysis applies Federal Housing Finance Agency (FHFA) house price repeat sales indexes from 384 metropolitan areas to estimate a multi-factor model of U.S. housing market integration. It then identifies statistical jumps in metrop…
We extend the Vasiček loan portfolio model to a setting where liabilities fluctuate randomly and asset values may be subject to systemic jump risk. We derive the probability distribution of the percentage loss of a uniform portfolio and analyze its properties. We find that the impact of liability risk is ambiguous and …
We set up a structural model to study credit risk for a portfolio containing several or many credit contracts. The model is based on a jump--diffusion process for the risk factors, i.e. for the company assets. We also include correlations between the companies. We discuss that models of this type have much in common wi…
We analyze a method to produce pairs of non independent Poisson processes from positively correlated, self-decomposable, exponential renewals. In particular the present paper provides the family of copulas pairing the renewals, along with the closed form for the joint distribution of the pair…
The paper analyzes optimal retirement strategies in a market with habit persistence and jump diffusion, finding discontinuous investment strategies.
We consider expected utility maximisation problem for exponential Levy models and HARA utilities in presence of illiquid asset in portfolio. This illiquid asset is modelled by an option of European type on another risky asset which is correlated with the first one. Under some hypothesis on Levy processes, we give the e…
In this paper we consider two semimartingales driven by diffusions and jumps. We allow both for finite activity and for infinite activity jump components. Given discrete observations we disentangle the {\it integrated covariation} (the covariation between the two diffusion parts, indicated by IC) from the co-jumps. Thi…
In the present paper we present a finite element approach for option pricing in the framework of a well-known stochastic volatility model with jumps, the Bates model. In this model the asset log-returns are assumed to follow a jump-diffusion model where the jump component consists of a Levy process of compound Poisson …
Enhances HDP-HMM for state transitions between similar states.
We obtain an explicit formula for the bilateral counterparty valuation adjustment of a credit default swaps portfolio referencing an asymptotically large number of entities. We perform the analysis under a doubly stochastic intensity framework, allowing for default correlation through a common jump process. The key ins…
Study the hedging of cryptocurrency options in a volatile market.
The paper models default probabilities and total defaults in credit portfolios using a contagion process with self-exciting jumps.
We study historical correlations and lead-lag relationships between individual stock risk (volatility of daily stock returns) and market risk (volatility of daily returns of a market-representative portfolio) in the US stock market. We consider the cross-correlation functions averaged over all stocks, using 71 stock pr…
This paper develops a novel numerical method for pricing American options in a two-asset jump-diffusion model.
Hybrid model improves synthetic equity data generation.
Study efficient pricing method for exchange options using Ornstein-Uhlenbeck model.
Motivated by the AIG bailout case in the financial crisis of 2007-2008, we consider an insurer who wants to maximize the expected utility of the terminal wealth by selecting optimal investment and risk control strategies. The insurer's risk process is modelled by a jump-diffusion process and is negatively correlated wi…
We determine the minimal entropy martingale measure for a general class of stochastic volatility models where both price process and volatility process contain jump terms which are correlated. This generalizes previous studies which have treated either the geometric Lévy case or continuous price processes with an ortho…
A fast method estimates correlations in hybrid systems using observable market data.
We consider the pricing of European-style structured credit payoff in a static framework, where the underlying default times are independent given a common factor. A practical application would consist of the pricing of nth-to-default baskets under the Gaussian copula model (GCM). We provide necessary and sufficient co…
The structural default model of Lipton and Sepp, 2009 is generalized for a set of banks with mutual interbank liabilities whose assets are driven by correlated Levy processes with idiosyncratic and common components. The multi-dimensional problem is made tractable via a novel computational method, which generalizes the…
Study compares models for pricing multi-strike quanto call options with SV, SC, and SER.
The paper calculates large genus limits for quadratic differential volumes and constants.
News might trigger jump arrivals in financial time series. The "bad" and "good" news seems to have distinct impact. In the research, a double exponential jump distribution is applied to model downward and upward jumps. Bayesian double exponential jump-diffusion model is proposed. Theorems stated in the paper enable est…
New algorithms improve MCMC efficiency for complex distributions.
Neural jump model improves option pricing accuracy.
Prices in financial markets exhibit extreme jumps far more often than can be accounted for by external news. Further, magnitudes of price changes are correlated over long times. These so called stylized facts are quantified by scaling laws similar to, for example, turbulent fluids. They are believed to reflect the comp…
Christmas causes 2-month LIBOR to jump.
Modified model for Quanto CDS pricing with stochastic recovery and reduced complexity.
A new model reduces Wrong-Way Risk in CVA pricing.
Researchers analyze record statistics in correlated random walks and Lévy flights.
We investigate the extension of the multilevel Monte Carlo path simulation method to jump-diffusion SDEs. We consider models with finite rate activity, using a jump-adapted discretisation in which the jump times are computed and added to the standard uniform dis- cretisation times. The key component in multilevel analy…