Work

Polynomial jump-diffusions on the unit simplex

Year: 2018

Type: article

Abstract: Polynomial jump-diffusions constitute a class of tractable stochastic models with wide applicability in areas such as mathematical finance and population genetics. We provide a full parameterization of polynomial jump-diffusions on the unit simplex under natural structural hypotheses on the jumps. As a stepping stone, we characterize well-posedness of the martingale problem for polynomial operators on general compact state spaces.

Source: The Annals of Applied Probability

DOI: 10.1214/17-aap1363

Authors: Christa Cuchiero, Martin Larsson, Sara Svaluto-Ferro

Institutions: University of Vienna, ETH Zurich

Language: English

Topic: Stochastic processes and financial applications

Subfield: Finance

Field: Economics, Econometrics and Finance

Domain: Social Sciences

Open Access status: bronze

Funders: National Science Foundation, Schweizerischer Nationalfonds zur Förderung der Wissenschaftlichen Forschung, Eidgenössische Technische Hochschule Zürich

Awards: Tractable Stopping Problems in Finance, G5831154965