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For a wide class of measures, the multifractal spectrum is shown to exist iff an appropriate large deviations principle holds, in which case the spectrum is directly obtained from the corresponding rate function. A large deviations tool, enabling the use of the Gärtner-Ellis theorem for the...
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Litterman and Scheinkman (1991) show that a three factor PCA model of the term structure fits the data in a remarkable way and is useful for hedging. However, this model is not arbitrage free under the assumption that markets are frictionless. That is, there are zero cost portfolios with...
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Randomness in portfolios of options and their common underlying originates from two major sources of uncertainty: the price of the underlying and the implied volatility smile. Within the subset of portfolios whose unique source of uncertainty is the volatility smile, we derive an explicit...
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