Showing 1 - 10 of 137
In this paper we study a continuous time, optimal stochastic investment problem under limited resources in a market with N firms. The investment processes are subject to a time-dependent stochastic constraint. Rather than using a dynamic programming approach, we exploit the concavity of the...
Persistent link: https://www.econbiz.de/10010319990
In this paper we develop several regression algorithms for solving general stochastic optimal control problems via Monte Carlo. This type of algorithms is particularly useful for problems with high-dimensional state space and complex dependence structure of the underlying Markov process with...
Persistent link: https://www.econbiz.de/10014213496
This chapter introduces the reader to definitions and key properties of stochastic processes that are important in finance. The discussion starts from the description of Brownian motion that describes the idea of a continuous random walk and proceeds to Ito processes that incorporate both trend...
Persistent link: https://www.econbiz.de/10014219510
This paper develops the idea of renewal time sampling, a novel sampling scheme constructed from stopping times of semimartingales. Based on this new sampling scheme we propose a class of volatility estimators named renewal based volatility estimators. In this paper we show that: (1) The spot...
Persistent link: https://www.econbiz.de/10014116287
A set of programs for the numerical simulation of the diffusion decomposition processes was developed by using simulation methods, kinetic and particle method. The complex has been validated on the model system Ni-Al by the growth of -phase separations. The results on the evolution of the...
Persistent link: https://www.econbiz.de/10014078371
Algorithms for simulation of a Lévy process X(t) are discussed, with particular emphasis on two algorithms approximating jumps that are in some sense small. One is classical, defining small jumps as those of small absolute value. The other one appears to be new and relies on an completely...
Persistent link: https://www.econbiz.de/10014082623
Local volatility model is a relatively simple way to capture volatility skew/smile. In spite of its drawbacks, it remains popular among practitioners for derivative pricing and hedging. For long-dated options or interest rate/equity hybrid products, in order to take into account the effect of...
Persistent link: https://www.econbiz.de/10014105696
Managing large-scale systems often involves simultaneously solving thousands of unrelated stochastic optimization problems, each with limited data. Intuition suggests one can decouple these unrelated problems and solve them separately without loss of generality. We propose a novel data-pooling...
Persistent link: https://www.econbiz.de/10014105939
A fundamental alternative for stochastic optimization problems named focus programming is proposed based on the focus theory of choice. Different from the existing approaches such as chance-constrained programming and two-stage stochastic programming which are based on expected utility theory,...
Persistent link: https://www.econbiz.de/10014108141
In this paper, we develop a robust numerical method in pricing options, when the underlying asset follows a jump diffusion model. We demonstrate that, with the quadratic spline collocation method, the integral approximation in the pricing PIDE is intuitively simple, and comes down to the...
Persistent link: https://www.econbiz.de/10013250550