Market option prices in last 20 years conrmed deviations from the Black and Scholes (BS) models assumptions, especially on the BS implied volatility. Implied binomial trees (IBT) models capture the variations of the implied volatility known as \volatility smile". They provide a discrete...

This chapter deals with the estimation of risk neutral distributions for pricing index options resulting from the hypothesis of the risk neutral valuation principle. After justifying this hypothesis, we shall focus on parametric estimation methods for the risk neutral density functions...

The subject of the present paper is a simplified model for a symmetric bistable system with memory or delay, the reference model, which in the presence of noise exhibits a phenomenon similar to what is known as stochastic resonance. The reference model is given by a one dimensional parametrized...

Due to its ability to allow and account for similarities betweenpairs of alternatives, the nested logit model is increasingly used in practical applications. However the fact that there are two different specifications of the nested logit model has not received adequate attention. The utility...

In this paper we introduce the dynamic semiparametric factor model (DSFM) for electricity forward curves. The biggest advantage of our approach is that it not only leads to smooth, seasonal forward curves extracted from exchange traded futures and forward electricity contracts, but also to a...

Many industries are exposed to weather risk which they can transfer on financial markets via weather derivatives. Equilibrium models based on partial market clearing became a useful tool for pricing such kind of financial instruments. In a multi-period equilibrium pricing model agents rebalance...

State price density (SPD) contains important information concerning market expectations. In existing literature, a constrained estimator of the SPD is found by nonlinear least squares in a suitable Sobolev space. We improve the behavior of this estimator by implementing a covariance structure...

A flexible statistical approach for the analysis of time-varying dynamics of transaction data on financial markets is here applied to intra-day trading strategies. A local adaptive technique is used to successfully predict financial time series, i.e., the buyer and the seller-initiated trading...

We propose a local adaptive multiplicative error model (MEM) accommodating timevarying parameters. MEM parameters are adaptively estimated based on a sequential testing procedure. A data-driven optimal length of local windows is selected, yielding adaptive forecasts at each point in time....