Models of dependence in asset returns with non-Gaussian marginals are investigated on ETF daily return data. The first is a full rank Gaussian copula. The second is a linear mixture of independent Lévy processes. The third correlates Gaussian components in a variance gamma representation. On a...

In a complete financial market every contingent claim can be hedged perfectly. In an incomplete market it is possible to stay on the safe side by superhedging. But such strategies may require a large amount of initial capital. Here we study the question what an investor can do who is unwilling...

We develop two novel approaches to solving for the Laplace transform of a time-changed stochastic process. We discard the standard assumption that the background process (X_t) is Levy. Maintaining the assumption that the business clock (T_t) and the background process are independent, we develop...

In this paper we study the stochastic area swept by a regular time-homogeneous diffusion till a stopping time. This unifies some recent literature in this area. Through stochastic time change we establish a link between the stochastic area and the stopping time of another associated...

With model uncertainty characterized by a convex, possibly non-dominated set of probability measures, the investor minimizes the cost of hedging a path dependent contingent claim with given expected success ratio, in a discrete-time, semi-static market of stocks and options. Based on duality...

We consider the problem of filtering and control in the setting of portfolio optimization in financial markets with random factors that are not directly observable. The example that we present is a commodities portfolio where yields on futures contracts are observed with some noise. Through the...

In this work, we apply our newly proposed perturbative expansion technique to a quadratic growth FBSDE appearing in an incomplete market with stochastic volatility that is not perfectly hedgeable. By combining standard asymptotic expansion technique for the underlying volatility process, we...

This study presents a set of closed-form exact solutions for pricing discretely sampled variance swaps and volatility swaps, based on the Heston stochastic volatility model with regime switching. In comparison with all the previous studies in the literature, this research, which obtains...