This paper introduces the class of volatility modulated Lévy-driven Volterra (VMLV) processes and their important subclass of Lévy semistationary (LSS) processes as a new framework for modelling energy spot prices. The main modelling idea consists of four principles: First, deseasonalised spot...

Seasonality is a repeatable tendency of a financial instrument to move in relation to a particular influencing factor. That factor could be the time of year, the year of a decade, changes in interest rates, inflation, energy prices, etc. We focus on stock price action and seasonal cycles derived...

After Lehman collapse, Market participants started to consider the credit risk as a major risk. It become vital to charge the potential default of the counterparty at the trading level. The CVA became rapidly a standar when two institutions want to trade a derivative product. The main task of...

Discounted cash flows methods such as Net Present Value and Internal Rate of Return are often used interchangeably or even together for assessing value creation in industrial and engineering projects. Notwithstanding its difficulties of applicability and reliability, the internal rate of return...

In this paper, we study the theory of preference over unbounded random prospects using an axiomatic approach. We first show that Yaari's dual independence axiom can be decomposed into two axioms, the homogeneity axiom and the co-monotonic independence with respect to addition axiom, and we...

We calculate the American local volatility. New insights on the American vanilla, call and put options in this paper are presented. In particular, the sensitivities of these products to the local volatility surface are illustrated. The Automatic Algorithmic Differentiation (AAD) pseudo code is...

The research article presents the highly innovative theoretical research results:1) the new quantum microeconomics theory in the quantum econophysics science is formulated; the idea on the existence of the discrete-time induced quantum transitions of firm's earnings (the firm's value) in the...

We present a comparison of the forecasting performances of three Dynamic Factor Models on a large monthly data panel of macroeconomic and financial time series for the UE economy. The first model relies on static principal-component and was introduced by Stock and Watson. The second is based on...

In this paper we introduce bounded rationality into the standard Mussa and Rosen (1978) model. We obtain the necessary conditions for the monopolist to benefit from the boundedly rational behavior of the consumers and discuss the incidence of costs of boundedly rational behavior. We also obtain...

Optimization of simulated systems is the goal of many methods, but most methods assume known environments. We, however, develop a `robust' methodology that accounts for uncertain environments. Our methodology uses Taguchi's view of the uncertain world, but replaces his statistical techniques by...