The last five years have witnessed a great momentum in the research into measures of financial risk. After many years of ad-hoc and non-consistent measures, now the problem is finally well formulated and some useful and very user-friendly solutions have been proposed. These new measures of risk...

We define the class of local Lévy processes. These are Lévy processes time changed by an inhomogeneous local speed function. The local speed function is a deterministic function of time and the level of the process itself. We show how to reverse engineer the local speed function from traded...

The risk-neutral process is modeled by a four parameter self-similar process of independent increments with a self-decomposable law for its unit time distribution. Six different processes in this general class are theoretically formulated and empirically investigated. We show that all six models...

The goal of the paper is to analyse the various issues attached to the valuation of weather derivatives. We focus our study on temperature-related contracts since they are the most widely traded at this point and try to address the following questions: (i) should the quantity underlying the...

Three processes reflecting persistence of volatility are initially formulated by evaluating three Lévy processes at a time change given by the integral of a mean-reverting square root process. The model for the mean-reverting time change is then generalized to include non-Gaussian models that...

The last few years have been a watershed for the commodities, cash and derivatives industry. New regulations and products have led to an explosion in the commodities markets, creating a new asset class for investors that includes hedge funds as well as University endowments, and has resulted in...

We present two results concerning soybean prices. First, we exhibit a simple relationship between stocks and price volatility. The observation of an increasing price volatility with decreasing inventory is often mentioned in the literature, but has so far been documented using a proxy for...

The current volume is a compendium of chapters, each of which consists of discursive review and recent research on the topic of exotic option pricing and advanced markets, written by leading scientists in this field.