Displaying similar documents to “Calibration and simulation of Heston model”

Testing Linearity in an AR Errors-in-variables Model with Application to Stochastic Volatility

D. Feldmann, W. Härdle, C. Hafner, M. Hoffmann, O. Lepski, A. Tsybakov (2003)

Applicationes Mathematicae

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Stochastic Volatility (SV) models are widely used in financial applications. To decide whether standard parametric restrictions are justified for a given data set, a statistical test is required. In this paper, we develop such a test of a linear hypothesis versus a general composite nonparametric alternative using the state space representation of the SV model as an errors-in-variables AR(1) model. The power of the test is analyzed. We provide a simulation study and apply the test to...

Models for stochastic mortality

Jan Iwanik (2007)

Applicationes Mathematicae

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This paper is an attempt to present and analyse stochastic mortality models. We propose a couple of continuous-time stochastic models that are natural generalizations of the Gompertz law in the sense that they reduce to the Gompertz function when the volatility parameter is zero. We provide a statistical analysis of the available demographic data to show that the models fit historical data well. Finally, we give some practical examples for the multidimensional models.

A finite-volume scheme for a kidney nephron model

Aurélie Edwards, Nicolas Seguin, Magali Tournus (2012)

ESAIM: Proceedings

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We present a finite volume type scheme to solve a transport nephron model. The model consists in a system of transport equations with specific boundary conditions. The transport velocity is driven by another equation that can undergo sign changes during the transient regime. This is the main difficulty for the numerical resolution. The scheme we propose is based on an explicit resolution and is stable under a CFL condition which does not depend on the stiffness of source terms. ...

Market completion using options

Mark Davis, Jan Obłój (2008)

Banach Center Publications

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Mathematical models for financial asset prices which include, for example, stochastic volatility or jumps are incomplete in that derivative securities are generally not replicable by trading in the underlying. In earlier work [Proc. R. Soc. London, 2004], the first author provided a geometric condition under which trading in the underlying and a finite number of vanilla options completes the market. We complement this result in several ways. First, we show that the geometric condition...

An asset – liability management stochastic program of a leasing company

Tomáš Rusý, Miloš Kopa (2018)

Kybernetika

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We build a multi-stage stochastic program of an asset-liability management problem of a leasing company, analyse model results and present a stress-testing methodology suited for financial applications. At the beginning, the business model of such a company is formulated. We introduce three various risk constraints, namely the chance constraint, the Value-at-Risk constraint and the conditional Value-at-Risk constraint along with the second-order stochastic dominance constraint, which...

Pricing forward-start options in the HJM framework; evidence from the Polish market

P. Sztuba, A. Weron (2001)

Applicationes Mathematicae

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We show how to use the Gaussian HJM model to price modified forward-start options. Using data from the Polish market we calibrate the model and price this exotic option on the term structure. The specific problems of Central Eastern European emerging markets do not permit the use of the popular lognormal models of forward LIBOR or swap rates. We show how to overcome this difficulty.

General proportional mean residual life model

Mohamed Kayid, Salman Izadkhah, Dalal ALmufarrej (2016)

Applications of Mathematics

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By considering a covariate random variable in the ordinary proportional mean residual life (PMRL) model, we introduce and study a general model, taking more situations into account with respect to the ordinary PMRL model. We investigate how stochastic structures of the proposed model are affected by the stochastic properties of the baseline and the mixing variables in the model. Several characterizations and preservation properties of the new model under different stochastic orders and...