In this paper I use a reduced-form, tree-based model to fit the term structure for the AAA-rated (German) and risky (Hungarian; spread 120-140 bp) bonds in the 2-month period immediately preceding Aug. 1998 Russian default. The term structure was optimized by the stochastic, derivatives-free...

The method of the Wigner-Ville function proposed by Wigner, (1932) and Ville (1947) is widely used in quantum statistical mechanics and signal processing and historically preceded the continuous-time wavelets. (Gabor, 1946) Here it is proposed for the studies of the financial time series. One of...

In 2008, Epstein and Schneider formulated a microstructure-inspired theory in which one could determine price volatility through a number of other market parameters such as asset volatility, risk free rate and dividend rate. A particular feature of the Epstein-Schneider theory is an extremely...

Copulas are widely used in financial economics (Brigo 2010) as well as in other areas of applied mathematics. Yet, there is much arbitrariness in their choice. The author proposes “a natural copula” concept, which minimizes Wasserstein distance between distributions in some space, in which...

The notion of bubbles is ubiquitous in the public discussion of finance. Yet, the empirical discovery of bubbles is notoriously difficult. The main shortcoming of the current approaches is that they rely on the estimation of the “fundamental value of an asset”, which is hard to estimate and...

The extremely useful method of Malliavin calculus has not yet gained adequate popularity because of the complicated analytical apparatus of this method. The author attempts here to propose a simplified algebraic formalism similar to Malliavin calculus, but based on the notion of...

An ability to postpone one's execution without penalty provides an important strategic advantage in high-frequency trading. To elucidate competition between traders one has to formulate to a quantitative theory of formation of the execution price from market expectations and quotes. This theory...