arXiv research

This study examines abnormal geodesics in 2D-Zermelo navigation problems, revealing their role in separating time minimal and maximal curves.

We derive a small-time expansion for out-of-the-money call options under an exponential Levy model, using the small-time expansion for the distribution function given in Figueroa-Lopez & Houdre (2009), combined with a change of numéraire via the Esscher transform. In particular, we quantify find that the effect of a no…

In this paper we investigate the small time heat kernel asymptotics on the cut locus on a class of surfaces of revolution, which are the simplest 2-dimensional Riemannian manifolds different from the sphere with non trivial cut-conjugate locus. We determine the degeneracy of the exponential map near a cut-conjugate poi…

We study the small-time behaviour of the rough Bergomi model, introduced by Bayer, Friz and Gatheral (2016), and prove a large deviations principle for a rescaled version of the normalised log stock price process, which then allows us to characterise the small-time behaviour of the implied volatility.

We consider the class of self-similar Gaussian stochastic volatility models, and compute the small-time (near-maturity) asymptotics for the corresponding asset price density, the call and put pricing functions, and the implied volatilities. Unlike the well-known model-free behavior for extreme-strike asymptotics, small…

In this paper we study the small time asymptotics for the heat kernel on a sub-Riemannian manifold, using a perturbative approach. We then explicitly compute, in the case of a 3D contact structure, the first two coefficients of the small time asymptotics expansion of the heat kernel on the diagonal, expressing them in …

We consider the heat equation associated with a class of second order hypoelliptic Hörmander operators with constant second order term and linear drift. We describe the possible small time heat kernel expansion on the diagonal giving a geometric characterization of the coefficients in terms of the divergence of the dri…

Researchers calculate entropy of heat kernel on manifolds for very small times.

We consider a Markov process $X$, which is the solution of a stochastic differential equation driven by a Lévy process $Z$ and an independent Wiener process $W$. Under some regularity conditions, including non-degeneracy of the diffusive and jump components of the process as well as smoothness of the Lévy density of $Z…

Study small-time CLTs for stochastic Volterra equations with various kernels.

We consider a stochastic volatility model with Lévy jumps for a log-return process $Z=(Z_{t})_{t\geq 0}$ of the form $Z=U+X$, where $U=(U_{t})_{t\geq 0}$ is a classical stochastic volatility process and $X=(X_{t})_{t\geq 0}$ is an independent Lévy process with absolutely continuous Lévy measure $ν$. Small-time expansio…

We consider the heat equation associated with a class of hypoelliptic operators of Kolmogorov-Fokker-Planck type in dimension two. We explicitly compute the first meaningful coefficient of the small time asymptotic expansion of the heat kernel on the diagonal, and we interpret it in terms of curvature-like invariants o…

For incomplete sub-Riemannian manifolds, and for an associated second-order hypoelliptic operator, which need not be symmetric, we identify two alternative conditions for the validity of Gaussian-type upper bounds on heat kernels and transition probabilities, with optimal constant in the exponent. Under similar conditi…

The paper solves heat kernel asymptotics on non-degenerate CR manifolds.

We consider small-time asymptotics for diffusion processes conditioned by their initial and final positions, under the assumption that the diffusivity has a sub-Riemannian structure, not necessarily of constant rank. We show that, if the endpoints are joined by a unique path of minimal energy, and lie outside the sub-R…

We compute the small time asymptotic of the fundamental solution of Hörmander's type hypoelliptic operators with drift, at a stationary point, $x_0$, of the drift field. We show that the order of the asymptotic depends on the controllability of an associated control problem and of its approximating system. If the contr…

We study the small time asymptotics of the gradient and Hessian of the logarithm of the heat kernel at the cut locus, giving, in principle, complete expansions for both quantities. We relate the leading terms of the expansions to the structure of the cut locus, especially to conjugacy, and we provide a probabilistic in…

Proves heat expansion for Laplacian on a singularity.

We extend previous large deviations results for the randomised Heston model to the case of moderate deviations. The proofs involve the Gärtner-Ellis theorem and sharp large deviations tools.

In this article, we consider a Markov process X, starting from x and solving a stochastic differential equation, which is driven by a Brownian motion and an independent pure jump component exhibiting state-dependent jump intensity and infinite jump activity. A second order expansion is derived for the tail probability …

We compute a sharp small-time estimate for the price of a basket call under a bi-variate SABR model with both $β$ parameters equal to $1$ and three correlation parameters, which extends the work of Bayer,Friz&Laurence [BFL14] for the multivariate Black-Scholes flat vol model. The result follows from the heat kernel on …

We study the leading term in the small-time asymptotics of at-the-money call option prices when the stock price process $S$ follows a general martingale. This is equivalent to studying the first centered absolute moment of $S$. We show that if $S$ has a continuous part, the leading term is of order $\sqrt{T}$ in time $…

Motivated by marginals-mimicking results for Itô processes via SDEs and by their applications to volatility modeling in finance, we discuss the weak convergence of the law of a hypoelliptic diffusions conditioned to belong to a target affine subspace at final time, namely $\mathcal{L}(Z_t|Y_t = y)$ if $X_{\cdot}=(Y_\cd…

We consider the problem of portfolio optimization in a simple incomplete market and under a general utility function. By working with the associated Hamilton-Jacobi-Bellman partial differential equation (HJB PDE), we obtain a closed-form formula for a trading strategy which approximates the optimal trading strategy whe…

Improved option pricing for SABR model using Gauss-Hermite quadrature.

Instantaneous volatility of logarithmic return in the lognormal fractional SABR model is driven by the exponentiation of a correlated fractional Brownian motion. Due to the mixed nature of driving Brownian and fractional Brownian motions, probability density for such a model is less studied in the literature. We show i…

Study local invariants and geometry of sub-Laplacian on H-type foliations.

We provide a thorough analysis of the path-dependent volatility model introduced by Guyon \cite{G17}, proving existence and uniqueness of a strong solution, characterising its behaviour at boundary points, providing asymptotic closed-form option prices as well as deriving small-time behaviour estimates.

We characterize the small-time asymptotic behavior of the exit probability of a Lévy process out of a two-sided interval and of the law of its overshoot, conditionally on the terminal value of the process. The asymptotic expansions are given in the form of a first-order term and a precise computable error bound. As an …

We prove certain generalization of Hardy's inequality where the "boundary defining function" is replaced by a polynomial defining a singular algebraic variety. An application is given on the existence of a small time heat trace expansion for a Schrödinger operator with mild singularities along this algebraic set.

We study the heat trace for both the drifting Laplacian as well as Schrödinger operators on compact Riemannian manifolds. In the case of a finite regularity potential or weight function, we prove the existence of a partial (six term) asymptotic expansion of the heat trace for small times as well as a suitable remainder…

We study the dynamics of the normal implied volatility in a local volatility model, using a small-time expansion in powers of maturity T. At leading order in this expansion, the asymptotics of the normal implied volatility is similar, up to a different definition of the moneyness, to that of the log-normal volatility. …

We study the small-time fluctuations for diffusion processes which are conditioned by their initial and final positions, under the assumptions that the diffusivity has a sub-Riemannian structure and that the drift vector field lies in the span of the sub-Riemannian structure. In the case where the endpoints agree and t…

New tests for identifying the number of latent factors in short panels with small time dimensions.

In this paper we analyze the behavior of the distance function under Ricci flows whose scalar curvature is uniformly bounded. We will show that on small time-intervals the distance function is $\frac12$-Hölder continuous in a uniform sense. This implies that the distance function can be extended continuously up to the …

Optimizes portfolio in volatile markets with jumps, providing accurate formulas.

This article shows that under locally uniformly integral bounds of the negative part of Ricci curvature the heat kernel admits a Gaussian upper bound for small times. This provides general assumptions on the geometry of a manifold such that certain function spaces are in the Kato class. Additionally, the results imply …

A small-time Edgeworth expansion of the density of an asset price is given under a general stochastic volatility model, from which asymptotic expansions of put option prices and at-the-money implied volatilities follow. A limit theorem for at-the-money implied volatility skew and curvature is also given as a corollary.…

This paper studies the properties of discrete time stochastic optimal control problems associated with portfolio selection. We investigate if optimal continuous time strategies can be used effectively for a discrete time market after a straightforward discretization. We found that Merton's strategy approximates the per…

New method recovers curvature from heat diffusion data.

Study spectral properties of sub-Riemannian Laplacians, proving quantum ergodicity and heat kernel asymptotics.

In this paper we study the deformations of bihamiltonian PDEs of hydrodynamic type with one dependent variable. The reason we study such deformations is that the deformed systems maintain an infinite number of commuting integrals of motion up to a certain order in the deformation parameter. This fact suggests that thes…

The geometry of the quaternionic anti-de Sitter fibration is studied in details. As a consequence, we obtain formulas for the horizontal Laplacian and subelliptic heat kernel of the fibration. The heat kernel formula is explicit enough to derive small time asymptotics. Related twistor spaces and corresponding heat kern…

For a sub-Riemannian manifold provided with a smooth volume, we relate the small time asymptotics of the heat kernel at a point $y$ of the cut locus from $x$ with roughly "how much" $y$ is conjugate to $x$. This is done under the hypothesis that all minimizers connecting $x$ to $y$ are strongly normal, i.e.\ all pieces…

3-balls in 4-sphere become isotopic in 5-ball.

We study the sub-Laplacian of the $15$-dimensional unit sphere which is obtained by lifting with respect to the Hopf fibration the Laplacian of the octonionic projective space. We obtain in particular explicit formulas for its heat kernel and deduce an expression for the Green function of a related sub-Laplacian. As a …

In this paper, we study the torsion flow which is served as the CR analogue of the Ricci flow in a closed pseudohermitian manifold. We show that there exists a unique smooth solution to the CR torsion flow in a small time interval with the CR pluriharmonic function as an initial data. In spirit, it is the CR analogue o…

Study on ball widths and minimal submanifolds in space forms.