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Farkas, Walter; Necula, Ciprian; Waelchli, Boris - 2015 - This version: 30 September 2015

In this paper we develop a one-factor non-affine stochastic volatility option pricing model where the dynamics of the underlying is endogenously determined from micro-foundations. The interaction and herding of the agents trading the underlying asset induce an amplification of the volatility of...

Persistent link: https://www.econbiz.de/10011507732

Markov cubature rules for polynomial processes

Filipović, Damir; Larsson, Martin; Pulido, Sergio - 2016

We study discretizations of polynomial processes using finite state Markov processes satisfying suitable moment matching conditions. The states of these Markov processes together with their transition probabilities can be interpreted as Markov cubature rules. The polynomial property allows us to...

Persistent link: https://www.econbiz.de/10011626304

Locally phi-integrable sigma-martingale densities for general semimartingales

Choulli, Tahir; Schweizer, Martin - 2015 - This version: 22.5.2015

A P-sigma-martingale density for a given stochastic process S is a local P-martingale Z0 starting at 1 such that the product ZS is a P-sigma-martingale. Existence of a P-sigma-martingale density is equivalent to a classic absence-of-arbitrage property of S, and it is invariant if we replace the...

Persistent link: https://www.econbiz.de/10011296922

Facelifting in utility maximization

Larsen, Kasper; Soner, Halil Mete; Žitković, Gordan - 2014

We establish the existence and characterization of a primal and a dual facelift - discontinuity of the value function at the terminal time - for utility maximization in incomplete semimartingale-driven financial markets. Unlike in the lower- and upper-hedging problems, and somewhat unexpectedly,...

Persistent link: https://www.econbiz.de/10010442910

Geometric step options with jumps : parity relations, PIDEs, and semi-analytical pricing

Farkas, Walter; Mathys, Ludovic - 2020

The present article studies geometric step options in exponential Lévy markets. Our contribution is manifold and extends several aspects of the geometric step option pricing literature. First, we provide symmetry and parity relations and derive various characterizations for both European-type...

Persistent link: https://www.econbiz.de/10012181323

S&P 500 index, an option-implied risk analysis

Barone-Adesi, Giovanni; Legnazzi, Chiara; Sala, Carlo - 2018

The forward-looking nature of option market data allows one to derive economically-based and model-free risk measures … classical risk measures for the S&P500 Index. Delivering good results both at short and long time horizons, the proposed option …-implied risk metrics emerge as a convenient alternative to the existing risk measures …

Persistent link: https://www.econbiz.de/10011899623

S&P 500 index, an option implied risk analysis

Barone-Adesi, Giovanni; Legnazzi, Chiara; Sala, Carlo - 2016

Persistent link: https://www.econbiz.de/10011619773

Intra-horizon expected shortfall and risk structure in models with jumps

Farkas, Walter; Mathys, Ludovic; Vasiljević, Nikola - 2019

The present article deals with intra-horizon risk in models with jumps. Our general understanding of intra-horizon risk … quantifying market risk by strictly relying on point-in-time measures cannot be deemed a satisfactory approach in general. Instead …, we argue that complementing this approach by studying measures of risk that capture the magnitude of losses potentially …

Persistent link: https://www.econbiz.de/10012179511

Expected life-time utility and hedging demands in a partially observable economy

Lundtofte, Frederik (contributor) - 2006

This paper analyzes the expected life-time utility and the hedging demands in an exchange only, representative agent general equilibrium under incomplete information. We derive an expression for the investor's expected life-time utility, and analyze his hedging demands for intertemporal changes...

Persistent link: https://www.econbiz.de/10003394292

A large-scale optimization model for replicating portfolios in the life insurance industry

Adelmann, Maximilian; Fernandez-Arjona, Lucio; Mayer, János - 2016

Replicating portfolios have recently emerged as an important tool in the life insurance industry, used for the valuation of companies' liabilities. This paper presents a replicating portfolio (RP) model for approximating life insurance liabilities as closely as possible. We minimize the L1 error...

Persistent link: https://www.econbiz.de/10011515725