Astonishingly little attention has been paid in academic literature to the 2008-2009 foreign exchange (FX) options debacle in Poland, the scale of which was unheard of. It affected not only an individual organization but a significant part of economy, being an example of a situation in which...

We present a multiscale analysis of the price dynamics of U.S. sector exchange-traded funds (ETFs). Our methodology features a multiscale noise-assisted approach, called the complementary ensemble empirical mode decomposition (CEEMD), that decomposes any financial time series into a number of...

In this paper, we establish a comparison between one of the most traded financial derivatives in the markets, the so-called catastrophe bonds (abbreviated as cat bonds) and the corporate bonds. In the first section, we start from a brief definition as well as some basic concepts. In section two,...

Spot option prices, forwards and options on forwards relevant for the commodity markets are computed when the underlying process S is modelled as an exponential of a process xi with memory as, e.g., a Volterra equation driven by a Levy process. Moreover, the interest rate and a risk premium rho...

The VSTOXX index tracks the expected 30-day volatility of the EURO STOXX 50 equity index. Futures on the VSTOXX index can, therefore, be used to hedge against economic uncertainty. We investigate the effect of trader inventory on the price of VSTOXX futures through a combination of stochastic...

This paper introduces and studies a new family of diffusion models for stock prices with applications in portfolio optimization. The diffusion model combines (stochastic) elasticity of volatility (EV) and stochastic volatility (SV) to create the SEV-SV model. In particular, we focus on the SEV...

Despite the growing interest in realized stochastic volatility models, their estimation techniques, such as simulated maximum likelihood (SML), are computationally intensive. Based on the realized volatility equation, this study demonstrates that, in a finite sample, the quasi-maximum likelihood...

We propose a state-dependent Phillips curve (PC) where the regime has changed endogenously. Using this framework, a free-standing PC is constructed. This study tests the robustness of the model, various types of inflation, slack measures, and various expectation measures. The PC is found to work...

Intraday high-frequency data of stock returns exhibit not only typical characteristics (e.g., volatility clustering and the leverage effect) but also a cyclical pattern of return volatility that is known as intraday seasonality. In this paper, we extend the stochastic volatility (SV) model for...

In this paper, we focus on two-factor lattices for general diffusion processes with state-dependent volatilities. Although it is common knowledge that branching probabilities must be between zero and one in a lattice, few methods can guarantee lattice feasibility, referring to the property that...