We consider the Heston-CIR stochastic-local volatility model in the context of foreign exchange markets, which contains both a stochastic and a local volatility component for the exchange rate combined with the Cox-Ingersoll-Ross dynamics for the domestic and foreign interest rates. We study a...

This brief manuscript provides an introduction to L\'evy processes and their applications in finance as the random process that drives asset models. Characteristic functions and random variable generators of popular L\'evy processes are presented in R.

In this article we use the Mean-Variance Model in order to measure the current market state. In our study we take the approach of detecting the overall alignment of portfolios in the spin picture. The projection to the ground-states enables us to use physical observables in order to describe the...

We present the Shortfall Deviation Risk (SDR), a risk measure that represents the expected loss that occur with certain probability penalized by the dispersion of results worse than such expectation. The SDR combines the Expected Shortfall (ES) and the Shortfall Deviation (SD), which we also...

The asymptotic distribution of the Markowitz portfolio is derived, for the general case (assuming fourth moments of returns exist), and for the case of multivariate normal returns. The derivation allows for inference which is robust to heteroskedasticity and autocorrelation of moments up to...

We consider a contracting problem in which a principal hires an agent to manage a risky project. When the agent chooses volatility components of the output process and the principal observes the output continuously, the principal can compute the quadratic variation of the output, but not the...

Trust is a collective, self-fulfilling phenomenon that suggests analogies with phase transitions. We introduce a stylized model for the build-up and collapse of trust in networks, which generically displays a first order transition. The basic assumption of our model is that whereas trust begets...

In this paper, we establish a dynamic game to allocate CSR (Corporate Social Responsibility) to the members of a supply chain. We propose a model of three-tier supply chain in decentralized state that is including supplier, manufacturer and retailer. For analyzing supply chain performance in...

We consider a nondominated model of a discrete-time financial market where stocks are traded dynamically, and options are available for static hedging. In a general measure-theoretic setting, we show that absence of arbitrage in a quasi-sure sense is equivalent to the existence of a suitable...

A large collection of financial contracts offering guaranteed minimum benefits are often posed as control problems, in which at any point in the solution domain, a control is able to take any one of an uncountable number of values from the admissible set. Often, such contracts specify that the...