When the pricing kernel is U-shaped, then expected returns of claims with payout on the upside are negative for strikes beyond a threshold, determined by the slope of the U-shaped kernel in its increasing region, and have negative partial derivative with respect to strike in the increasing...

Allowing for correlated squared returns across two consecutive periods, portfolio theory for two periods is developed. This correlation makes it necessary to work with non-Gaussian models. The two period conic portfolio problem is formulated and implemented. This development leads to a mean ask...

Return distributions in the class of pure jump limit laws are observed to reflect numerous asymmetries between the upward and downward motions of asset prices. The return distributions are modeled by self decomposable parametric laws with all parameters continuously responding to each other....

When the pricing kernel is U-shaped, then expected returns of claims with payout on the upside are negative for strikes beyond a threshold, determined by the slope of the U-shaped kernel in its increasing region, and have negative partial derivative with respect to strike in the increasing...

Daily return distributions are modeled by pure jump limit laws that are selfdecomposable laws. The returns may be seen as composed of a sum of independent and identically distributed increments or as a selfsimilar law scaling the sum of exponentially weighted past shocks or a combination...

Asset returns are modeled by bilateral gamma processes with zero covariations. Covariances are then observed to be consequences of randomness in variations. Support vector machine regressions on prices are employed to model the implied randomness. The contributions of support vector machine...

Market clichés assert that markets take escalators up and elevators down. The observation suggests differentiating models for up and down moves. Non-diffusive models allow for this and we model the move as the difference of two independent mean reverting increasing processes driven by gamma...

A time homogeneous, purely discontinuous, parsimonous Markov martingale model is proposed for the risk neutral dynamics of equity forward prices. Transition probabilities are in the variance gamma class with spot dependent parameters. Markov chain approximations give access to option prices. The...

The theory of two price markets of Cherny and Madan (2010) yields closed forms for bid and ask prices. Defining profits as the difference between the mid quote and the risk neutral expectation and capital as difference between the ask and the bid price one obtains precise expressions for these...

Three particular models of dependence in asset returns with non-Gaussian marginals are investigated on daily return data for sector exchange traded funds. The first model is a full rank Gaussian copula (FGC). The second models returns as a linear mixture of independent Lévy processes (LML). The...