This paper is concerned with a construction of new quadratic spline wavelets on a bounded interval satisfying homogeneous Dirichlet boundary conditions. The inner wavelets are translations and dilations of four generators. Two of them are symmetrical...
The degradation of Lithium-ion batteries is usually measured by capacity loss. When batteries deteriorate with usage, the capacities would generally have a declining trend. However, occasionally, considerable capacity regeneration may occur during th...
In this paper, we study the valuation of power exchange options with a correlated hybrid credit risk when the underlying assets follow the jump-diffusion processes. The hybrid credit risk model is constructed using two credit risk models (the reduced...
In this paper, we conduct a fast calibration in the jump-diffusion model to capture the Bitcoin price dynamics, as well as the behavior of some components affecting the price itself, such as the risk of pitfalls and its ambiguous effect on the evolut...
The high-order finite difference method for option pricing is one of the most popular numerical algorithms. Therefore, it is of great significance to study its convergence rate. Based on the relationship between this algorithm and the trinomial tree...
This paper explores a numerical method for European and American option pricing under time fractional jump-diffusion model in Caputo scene. The pricing problem for European options is formulated using a time fractional partial integro-differential eq...
We explore a multi-asset jump-diffusion pricing model, combining a systemic risk asset with several conditionally independent ordinary assets. Our approach allows for analyzing and modeling a portfolio that integrates high-activity security, such as...
We develop the process of discounting when underlying rates follow a jump-diffusion process, that is, when, in addition to diffusive behavior, rates suffer a series of finite discontinuities located at random Poissonian times. Jump amplitudes are als...
This paper studies optimal dividend and capital injection strategies with active exit options under a jump-diffusion model. We introduce a piecewise terminal payoff function to capture stop-loss exits (for deficits) and profit-taking exits (for surpl...
We propose a machine learning-based methodology which makes use of ensemble methods with the aims (i) of treating missing data in time series with irregular observation times and detecting anomalies in the observed time behavior; (ii) of defining sui...
For the first time, the power law characteristics of stock price jump intervals have been empirically found generally in stock markets. The classical jump-diffusion model is described as the jump-diffusion model with power law (JDMPL). An artificial...
The paper is devoted to forecasting hourly day-ahead electricity prices from the perspective of the existence of jumps. We compare the results of different jump detection techniques and identify common features of electricity price jumps. We apply th...
We propose a stochastic model of infectious disease transmission that is more realistic than those found in the literature. The model is based on jump-diffusion processes. However, it is defined in such a way that the number of people susceptible to...
This paper presents a novel multivariate mean-reverting jump-diffusion model that incorporates correlated jumps and seasonal effects to capture the complex dynamics of commodity prices. The model also accounts for the interplay between price volatili...
Based on the present studies about the application of approximative fractional Brownian motion in the European option pricing models, our goal in the article is that we adopt the creative model by adding approximative fractional stochastic volatility...
This paper develops a fully-fledged statistical arbitrage strategy based on a mean-reverting jump–diffusion model and applies it to high-frequency data of the S&P 500 constituents from January 1998–December 2015. In particular, the es...
This study analyzes the term structures of sovereign quanto credit default swap (CDS) spreads and currency options, which are driven by anticipated currency depreciation risk following sovereign credit default (Twin Ds). We develop consistent pricing...
This paper deals with a credit derivative pricing problem using the martingale approach. We generalize the conventional reduced-form credit risk model for a credit default swap market, assuming that the firms’ default intensities depend on the...
Stock return prediction for quantitative trading in U.S. equity markets has evolved from parametric econometric modeling toward data-driven deep learning systems that must jointly capture temporal dynamics, discontinuous jumps, and evolving cross-ass...
This paper is aimed at developing a stochastic volatility model that is useful to explain the dynamics of the returns of gold, silver, and platinum during the period 1994–2019. To this end, it is assumed that the precious metal returns are driven by...
American options are more complex to price than European options because they grant holders the right to exercise at any time before expiration, especially in realistic market environments that consider both stochastic volatility and asset price jump...
This paper is dedicated to studying the optimal investment proportions of three types of assets with symmetry, namely, risky assets, risk-free assets, and wealth management products, when the stochastic expenditure process follows a jump-diffusion mo...
In traditional finance, option prices are typically calculated using crisp sets of variables. However, as reported in the literature novel, these parameters possess a degree of fuzziness or uncertainty. This allows participants to estimate option pri...
Accurate crude oil price forecasting is essential, considering oil’s critical role in the global economy. However, the crude oil market is significantly influenced by external, transient events, posing challenges in capturing price fluctuations...
We explore the most probable phase portrait (MPPP) of a stochastic single-species model incorporating the Allee effect by utilizing the nonlocal Fokker–Planck equation (FPE). This stochastic model incorporates both non-Gaussian and Gaussian noi...
We consider the indefinite, linear-quadratic, mean-field-type stochastic zero-sum differential game for jump-diffusion models (I-LQ-MF-SZSDG-JD). Specifically, there are two players in the I-LQ-MF-SZSDG-JD, where Player 1 minimizes the objective func...
At present, many cloud services are managed by using open source software, such as OpenStack and Eucalyptus, because of the unification management of data, cost reduction, quick delivery and work savings. The operation phase of cloud computing has a...
In this paper, we consider the problem of pricing a spread option when the underlying assets follow a bivariate regime-switching jump diffusion model. We exploit an approximation technique which is based on the univariate Fourier transform representa...
In this paper we propose a maximum entropy estimator for the asymptotic distribution of the hedging error for options. Perfect replication of financial derivatives is not possible, due to market incompleteness and discrete-time hedging. We derive the...
In this paper, we creatively price the discretely sampled variance swaps under the mean-reverting Gaussian model (MRG model in short) with regime-switching asymmetric double exponential jump diffusion. We extend the traditional MRG model by further c...
In this paper, we extend our jump-diffusion model to price the catastrophe bond. The model has three coupled stochastic processes—the spot exchange rate and the domestic and foreign interest rates—under a risk-neutral measure, with compen...
This paper aims to value the cliquet-style equity-linked insurance product with death benefits. Whether the insured dies before the contract maturity or not, a benefit payment to the beneficiary is due. The premium is invested in a financial asset, w...
This paper investigates a financial market where asset prices follow a multi-dimensional Brownian motion process and a multi-dimensional Poisson process characterized by diverse credit and deposit rates where the credit rate is higher than the deposi...
Standard asset pricing models treat price dynamics as a stochastic process driven by undifferentiated random noise, rendering them agnostic about the primary engine of price discovery: the arrival of economically significant information. This paper i...
This paper develops a semi-closed-form pricing framework for vulnerable geometric Asian options under a three-factor stochastic volatility jump-diffusion model with stochastic interest rates. To the best of our knowledge, this is the new framework to...
Extreme financial events usually lead to sharp jumps in stock prices and volatilities. In addition, jump clustering and stock price correlations contribute to the risk amplification acceleration mechanism during the crisis. In this paper, four Jump-G...
The existing estimators for the drift coefficient in the diffusion model with jumps involve jump components and possess larger boundary error. How to effectively estimate the drift function is an important issue that faces challenges and has theoreti...
In this paper, we study the indefinite linear-quadratic (LQ) stochastic optimal control problem for stochastic differential equations (SDEs) with jump diffusions and random coefficients driven by both the Brownian motion and the (compensated) Poisson...
Mortality forecasting has always been a target of study by academics and practitioners. Since the introduction and rising significance of securitization of risk in mortality and longevity, more in-depth studies regarding mortality have been carried o...
The primary cause of the scale effect in scaled models for flood discharge and energy dissipation lies in the dissimilarity of the air dispersion patterns of the ski-jump nappe. To uncover the scale-effect relationship governing the air dispersion pa...
We develop a PDE-constrained optimization framework for calibrating a regime-switching Heston–Merton model to S&P 500 index option prices. The model features two latent Markov regimes modulating stochastic volatility parameters and compound...
This paper presents an efficient numerical framework for solving the Merton jump–diffusion partial integro-differential equation (PIDE) arising in European option pricing. To address the nonlocal integral term generated by asset price jumps, we...
With the deepening of degradation, the stability and reliability of the degrading system usually becomes poor, which may lead to random jumps occurring in the degradation path. A non-homogeneous jump diffusion process model is introduced to more accu...
This paper focuses on the pricing problem of binary options under stochastic interest rates, stochastic volatility, and a mixed exponential jump diffusion model. Considering the negative interest rates in the market in recent years, this paper assume...
This paper extends the traditional jump-diffusion model to a comprehensive general Lévy process model with the stochastic interest rate for European-style options pricing. By using the Girsanov theorem and Itô formula, we derive the unif...
The spot freight rate processes considered in the literature for pricing forward freight agreements (FFA) and freight options usually have a particular dynamics in order to obtain the prices. In those cases, the FFA prices are explicitly obtained. Ho...
The paper presents a new mathematical model of TCP (Transmission Control Protocol) link functioning in a heterogeneous (wired/wireless) channel. It represents a controllable, partially observable stochastic dynamic system. The system state describes...
In this paper, we study a generalised CIR process with externally-exciting and self-exciting jumps, and focus on the distributional properties and applications of this process and its aggregated process. The aim of the paper is to introduce a more ge...
We develop a deep reinforcement learning (RL) framework for an optimal market-making (MM) trading problem, specifically focusing on price processes with semi-Markov and Hawkes Jump-Diffusion dynamics. We begin by discussing the basics of RL and the d...
The Black–Scholes model laid the mathematical foundation for modern option pricing; however, its assumptions—stationary, independent, and Gaussian returns—are frequently violated in real markets, where long-memory volatility and sud...
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