arXiv research

Study on small-time behavior of rough Bergomi model using large deviations principle.

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 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 …

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…

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 study the tick dynamical behavior of the bond futures in Korean Futures Exchange(KOFEX) market. Since the survival probability in the continuous-time random walk theory is applied to the bond futures transaction, the form of the decay function in our bond futures model is discussed from two kinds of Korean Treasury …

Study calculates small-time basket option pricing under bi-variate SABR model.

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…

Study heat traces for drifting Laplacian and Schrödinger operators on manifolds.

We propose a simple stochastic volatility model which is analytically tractable, very easy to simulate and which captures some relevant stylized facts of financial assets, including scaling properties. In particular, the model displays a crossover in the log-return distribution from power-law tails (small time) to a Ga…

Asymptotic expansions for call prices and implied volatilities in exponential Lévy models.

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

Characterizes Rough Heston model's behavior in small, large, and $H o 0$ limits.

Study small-time fluctuations for sub-Riemannian diffusion loops.

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 find a simple strategy approximating optimal portfolio for short time horizons.

Study the heat kernel on quaternionic anti-de Sitter spaces and related spaces.

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…

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

Quantum theory explains financial market price fluctuations.

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.

Optimal exercise boundary for put options with delivery lags identified.

Study option pricing near expiry for moderately out-of-the-money calls.

Researchers compute heat kernel coefficients for 2D diffusion operators.

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 …

Study on diffusion in non-complete sub-Riemannian manifolds with specific conditions.

High frequency data in finance have led to a deeper understanding on probability distributions of market prices. Several facts seem to be well stablished by empirical evidence. Specifically, probability distributions have the following properties: (i) They are not Gaussian and their center is well adjusted by Levy dist…

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…

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

Study derives CEV volatility for SABR model, reducing approximation error.

Extends moderate deviations for a randomised Heston model.

This work models financial market returns with asymmetric Tsallis distributions, improving fit over symmetric q-Gaussians.

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 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. …

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

Paper develops a new method for calculating the probability density of a fractional SABR model.

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

Analyzed Guyon's volatility model for existence and uniqueness.

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 …

New method recovers curvature from heat diffusion data.