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The trade of a fixed stock can be regarded as the basic process that measures its momentary price. The stock price is exactly known only at the time of sale when the stock is between traders, that is,...
The principle of absence of arbitrage opportunities allows obtaining the distribution of stock price fluctuations by maximizing its information entropy. This leads to a physical description of the u...
We show that in a large class of stochastic volatility models with additional skew-functions (local-stochastic volatility models) the tails of the cumulative distribution of the log-returns behave as...
We consider uncorrelated Stein-Stein, Heston, and Hull-White models and their perturbations by compound Poisson processes with jump amplitudes distributed according to a double exponential law. Simila...
We propose procedures for testing whether stock price processes are martingales based on limit order type betting strategies. We first show that the null hypothesis of martingale property of a stock p...
It is well-known how to determine the price of perpetual American options if the underlying stock price is a time-homogeneous diffusion.In the present paper we consider the inverse problem, i.e. given...
The stochastic exponential Zt = exp{Mt − M0 − (1/2)hM,Mit} of a continuous local martingale M is itself a continuous local martingale. We give a necessary and sufficient condition for the ...
Theory suggests that, in the presence of local bias, the price of a stock should be decreasing in the ratio of the aggregate book value of firms in its region to the aggregate risk tolerance of invest...

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