Representing continuously compounded returns by their four bilateral gamma parameter estimates a multiclass classification support vector machine is trained on a sample less than one percent of the data to predict the asset class. The asset classes considered are equities, volatility,...

Options paying the product of put and/or call option payouts at different strikes on two underlying assets are observed to synthesize joint densities and replicate differentiable functions of two underlying asset prices. The pricing of such options is undertaken from three perspectives. The...

A Markov chain with an expanding non-uniform grid matching risk neutral marginal distributions is constructed. Conditional distributions of the chain are in the variance gamma class with prespecified skewness and excess kurtosis. Time change and space scale volatilities are calibrated from...

Comonotone additivity for two price economy bid and ask prices motivates combining bid prices for call options with the ask prices for puts and the converse to construct two densities (termed lower and upper) reflected by these prices. The two densities scaled to a unit mean are here linked by...

The spirit of now in nowcasting suggests expanding the current to include the near future. Decision theory is then developed by incorporating the consequences of actions into the present. With the future falling into the present discounting it is no longer permitted. Value functions are then...

This study formalizes the departure between risk-neutral and physical index return volatilities, termed volatility spreads. Theoretically, the departure between risk neutral and physical index volatility is connected to the higher-order physical return moments and the parameters of the pricing...

This article provides several new insights into the economic sources of skewness. First, we document the differential pricing of individual equity options versus the market index, and relate it to variations in return skewness. Second, we show how risk aversion introduces skewness in the...

This article studies the valuation of options written on the average level of a Markov process. The general properties of such options are examined. We propose a closed-form characterization in which the option payoff is contingent on cumulative catastrophe losses. In our framework, the loss...

This article studies the valuation of average-rate contingent claims (both arithmetic and geometric), whose importance in corporate risk management is increasing rapidly. Arbitrage--free characterizations are provided for such option--like Asian claims. When the spot price is governed by a...

This paper studies the structure of stock market crashes, rallies, their jump arrival rates, and extremes. Large market moves are characterized in a pure-jump modeling framework. Based on both raw and devolatized returns, it is shown empirically that crashes are more severe in intensity than...