arXiv research

In this paper we discuss Bayesian nonconvex penalization for sparse learning problems. We explore a nonparametric formulation for latent shrinkage parameters using subordinators which are one-dimensional Lévy processes. We particularly study a family of continuous compound Poisson subordinators and a family of discrete…

New financial models use tempered stable subordination for better correlation dynamics.

Time-subordinated Brownian motion models improve financial market stochastic distribution.

Subordination is an often used stochastic process in modeling asset prices. Subordinated Levy price processes and local volatility price processes are now the main tools in modern dynamic asset pricing theory. In this paper, we introduce the theory of multiple internally embedded financial time-clocks motivated by beha…

Study shows subordinated Cramér-Lundberg model increases ruin probability.

We unify and extend a number of approaches related to constructing multivariate Variance-Gamma (V.G.) models for option pricing. An overarching model is derived by subordinating multivariate Brownian motion to a subordinator from the Thorin (1977) class of generalised Gamma convolution subordinators. A class of models …

This paper extends subordinated models to include stochastic time changes, improving financial modeling.

Analyzes first exit times in a modified Barndorff-Nielsen and Shephard model.

We compute the value of a variance swap when the underlying is modeled as a Markov process time changed by a Lévy subordinator. In this framework, the underlying may exhibit jumps with a state-dependent Lévy measure, local stochastic volatility and have a local stochastic default intensity. Moreover, the Lévy subordina…

New findings show independent subordination is not relevant for accurate option pricing.

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…

Takamura established a theory on splitting families of degenerations of complex curves. He introduced a powerful method for constructing a splitting family, called a barking family, in which there appear not only a singular fiber over the origin but also singular fibers over other points, called subordinate fibers. In …

The weak variance-alpha-gamma process is a multivariate Lévy process constructed by weakly subordinating Brownian motion, possibly with correlated components with an alpha-gamma subordinator. It generalises the variance-alpha-gamma process of Semeraro constructed by traditional subordination. We compare three calibrati…

We propose an efficient method to evaluate callable and putable bonds under a wide class of interest rate models, including the popular short rate diffusion models, as well as their time changed versions with jumps. The method is based on the eigenfunction expansion of the pricing operator. Given the set of call and pu…

This paper studies subordinate Ornstein-Uhlenbeck (OU) processes, i.e., OU diffusions time changed by Lévy subordinators. We construct their sample path decomposition, show that they possess mean-reverting jumps, study their equivalent measure transformations, and the spectral representation of their transition semigro…

In this paper we consider a new mathematical extension of the Black-Scholes model in which the stochastic time and stock share price evolution is described by two independent random processes. The parent process is Brownian, and the directing process is inverse to the totally skewed, strictly α-stable process. The subo…

High frequency based estimation methods for a semiparametric pure-jump subordinated Brownian motion exposed to a small additive microstructure noise are developed building on the two-scales realized variations approach originally developed by Zhang et. al. (2005) for the estimation of the integrated variance of a conti…

The present paper introduces a jump-diffusion extension of the classical diffusion default intensity model by means of subordination in the sense of Bochner. We start from the bi-variate process $(X,D)$ of a diffusion state variable $X$ driving default intensity and a default indicator process $D$ and time change it wi…

New model uses variance-Hawkes process to fit energy market returns.

The paper characterizes stochastic completeness on Riemannian manifolds using nonlocal conditions.

New method estimates VaR and ES using high-frequency data, outperforming existing approaches.

This dissertation reports work where physics methods are applied to financial and economical problems. The first part studies stock market data (chapter 1 to 5). The second part is devoted to personal income in the USA (chapter 6). We first study the probability distribution of stock returns at mesoscopic time lags (re…

Extends Alòs' formula to Barndorff-Nielsen and Shephard model.

Researchers develop a generalised geometric Brownian motion for better asset pricing.

DSPM models control noise volatility, improving financial data analysis.

Proposes NDIG model to capture bitcoin volatility and option pricing.

The paper uses the variance-gamma model to price options and explain excess kurtosis.

An almost Clifford and an almost Cliffordian manifold is a $G$--structure based on the definition of Clifford algebras. An almost Clifford manifold based on $\mathcal O:= \cc l (s,t)$ is given by a reduction of the structure group $GL(km, \mathbb R)$ to $GL(m, {\mathcal O})$, where $k=2^{s+t}$ and $m \in \mathbb N$. An…

The stability of the financial system is associated with systemic risk factors such as the concurrent default of numerous small obligors. Hence it is of utmost importance to study the mutual dependence of losses for different creditors in the case of large, overlapping credit portfolios. We analytically calculate the m…

To mitigate potential contagion from future banking crises, the European Commission recently proposed a framework which would provide for the $\textit{bail-in}$ of bank creditors in the event of failure. In this study, we examine this framework retrospectively in the context of failed European banks during the global f…

In this paper we study the pricing of exchange options under a dynamic described by stochastic correlation with random jumps. In particular, we consider a Ornstein-Uhlenbeck covariance model with Levy Background Noise Process driven by Inverse Gaussian subordinators. We use expansion in terms of Taylor polynomials and …

Modeling dependent defaults with multivariate Cox processes.

Unified treatment of CLTs for Lévy models across physics, finance, and econometrics.

A tick size is the smallest increment of a security price. It is clear that at the shortest time scale on which individual orders are placed the tick size has a major role which affects where limit orders can be placed, the bid-ask spread, etc. This is the realm of market microstructure and there is a vast literature o…

Study on measure-valued CARMA processes in Banach spaces.

Fine-grained visual categorization (FGVC) is to categorize objects into subordinate classes instead of basic classes. One major challenge in FGVC is the co-occurrence of two issues: 1) many subordinate classes are highly correlated and are difficult to distinguish, and 2) there exists the large intra-class variation (e…

New pricing model uses variance-gamma process for financial assets.

For non-compact manifolds with boundary we prove that bounded geometry defined by coordinate-free curvature bounds is equivalent to bounded geometry defined using bounds on the metric tensor in geodesic coordinates. We produce a nice atlas with subordinate partition of unity on manifolds with boundary of bounded geomet…

We construct a decomposition of the identity operator on a Riemannian manifold $M$ as a sum of smooth orthogonal projections subordinate to an open cover of $M$. This extends a decomposition of the real line by smooth orthogonal projection due to Coifman, Meyer and Auscher, Weiss, Wickerhauser, and a similar decomposit…

We show a Whitney Approximation Theorem for a continuous map from a manifold to a smooth CW complex. This enables us to show that a topological CW complex is homotopy equivalent to a smooth CW complex in a category of topological spaces. It is also shown that, for any open covering of a smooth CW complex, there exists …

Improved stochastic clocks for financial models without increasing trades.

Study extends Lévy models to capture market propagation delays.

We revisit the notion of individual fairness proposed by Dwork et al. A central challenge in operationalizing their approach is the difficulty in eliciting a human specification of a similarity metric. In this paper, we propose an operationalization of individual fairness that does not rely on a human specification of …

We give time-slicing path integral formulas for solutions to the heat equation corresponding to a self-adjoint Laplace type operator acting on sections of a vector bundle over a compact Riemannian manifold with boundary. More specifically, we show that such a solution can be approximated by integrals over finite-dimens…

We propose a general interpretation for long-range correlation effects in the activity and volatility of financial markets. This interpretation is based on the fact that the choice between `active' and `inactive' strategies is subordinated to random-walk like processes. We numerically demonstrate our scenario in the fr…

New method identifies uncertainty shocks in financial markets using revised VIX.

Develops a new bivariate process for energy markets with improved simulation methods.

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…