Asymptotic and bootstrap tests are studied for testing whether there is a relation of stochastic dominance between two distributions. These tests have a null hypothesis of nondominance, with the advantage that, if this null is rejected, then all that is left is dominance. This also leads us to...

While the stochastic volatility (SV) generalization has been shown to improvethe explanatory power compared to the Black-Scholes model, the empiricalimplications of the SV models on option pricing have not been adequately tested.The purpose of this paper is to first estimate a multivariate SV...

We estimate a general microstructure model of the transitory and permanent impact of order flow on stock prices. Jumps are detected in both the transaction price (observation equation) and fundamental value (state equation). The model's parameters and variances are updated in real time. Prices...

Electricity retailers face increasing uncertainty due to the ongoing expansion of unpredictable, distributed generation in the residential sector. We analyze how increasing levels of households' solar PV self-generation affect the short-term decisionmaking and associated risk exposure of...

A quantitative analysis on the pricing of forward starting options under stochastic volatility and stochastic interest rates is performed. The main finding is that forward starting options not only depend on future smiles, but also directly on the evolution of the interest rates as well as the...

In reaction to the well-known stylized facts observed in market data for stocks and options, a multitude of option pricing models beyond Black-Scholes (BS) have been developed relaxing the strict BS assumptions. While these models by construction outperform the BS model in terms of fitting...

We consider the pricing of FX, inflation and stock options under stochastic interest rates and stochastic volatility, for which we use a generic multi-currency framework. We allow for a general correlation structure between the drivers of the volatility, the inflation index, the domestic...

This paper introduces a new class of stochastic volatility models which allows for stochastic volatility of volatility (SVV): Volatility modulated non-Gaussian Ornstein-Uhlenbeck (VMOU) processes. Various probabilistic properties of (integrated) VMOU processes are presented. Further we study the...