We consider an affine term structure model of interest rates, where the factors satisfy a linear diffusion equation. We assume that the information available to an agent comes from observing the yields of a finite number of traded bonds and that this information is not sufficient to reconstruct...

We consider a family of processes (X[var epsilon], Y[var epsilon]) where X[var epsilon] = (X[var epsilon]t) is unobservable, while Y[var epsilon] = (Y[var epsilon]t) is observable. The family is given by a model that is nonlinear in the observations, has coefficients that may be rapidly...

Most authors who studied the problem of option hedging in incomplete markets, and, in particular, in models with jumps, focused on finding the strategies that minimize the residual hedging error. However, the resulting strategies are usually unrealistic because they require a continuously...

We present new algorithms for weak approximation of stochastic differential equations driven by pure jump Lévy processes. The method uses adaptive non-uniform discretization based on the times of large jumps of the driving process. To approximate the solution between these times we replace the...

We provide asymptotic results for time-changed Lévy processes sampled at random instants. The sampling times are given by the first hitting times of symmetric barriers, whose distance with respect to the starting point is equal to [epsilon]. For a wide class of Lévy processes, we introduce a...