We formulate the problem of finding classes of kinetic dependencies in irreversible thermodynamic and microeconomic systems for which minimal dissipation processes belong to the same type. We show that this problem is an inverse optimal control problem and solve it. The commonality of this...

One of the most popular approaches to default probability estimation using market information is the Merton [1974] approach. By explicitly modelling a firm's market value, market value volatility and liability structure over time using contingent claims analysis the Merton model defines a firm...

In a context of complete financial markets where asset prices follow Ito's processes, we characterize the set of consumption processes which are optimal for a given stochastic differential utility (e.g. Duffie and Epstein (1992)) when beliefs are unknown. Necessary and sufficient conditions for...

In this paper, we offer an alternative proof of the Capital Asset Pricing Model when the returns follow a multivariate elliptical distribution. Empirical studies continue to demonstrate the inappropriateness of the normality assumption in modelling asset returns. The class of elliptical...

We extend some known results on a relation between the distribution tails of the continuous local martingale supremum and its quadratic variation to the case of locally square integrable martingale with bounded jumps. The predictable and optional quadratic variations are involved in the main result.

We give explicit upper bounds for convergence rates when approximating (both one- and two-sided general curvlinear) boundary crossing probabilities for the Wiener process by similar probabilities for close boundaries (of simpler form for which computing the possibility is feasible). In...

This paper introduces an easy to follow method for continuous time model estimation. It serves as an introduction on how to convert a state space model from continuous time to discrete time, how to decompose a hybrid stochastic model into a trend model plus a noise model, how to estimate the...