# All Questions

Tagged with stochastic-processes mathematical-finance

16
questions

**-4**

votes

**1**answer

200 views

### Reference request in optimal stopping [closed]

I am given the following task. Distributed over a trading day, I am supposed to buy a certain quantity of a good. The price of this good changes during the day. The goal is to buy the required ...

**1**

vote

**0**answers

62 views

### Non-diagonalizable matrix in a discretized Ornstein-Uhlenbeck process

I am attempting to implement a pairs trading algorithm for two securities by approximating a discretized version of the Ornstein-Uhlenbeck process:
\begin{equation*}
d\mathbf{S}_t = \mathbf{\kappa}(\...

**1**

vote

**0**answers

124 views

### Unique EMM & completeness in the Black-Scholes model

Consider the Black-Scholes model
$$ dS(t) = \mu(t) S(t) dt + \sigma(t) S(t) dW^{\mathbb{P}}(t) $$
$$ dB(t) = r(t) B(t) dt$$
Steele shows now in "Stochastic Calculus & Financial Applications" (Ch. ...

**3**

votes

**2**answers

192 views

### Large deviation bound for O-U process

Assume $X_t$ is an Ornstein-Uhlenbeck process in the form of
$$
d X_t = -\alpha X_t dt + \sigma dB_t
$$
Is there an exponential bound (large-deviation bound) for
$$
P\left(
\max_{t\le T} |X_t| \ge z
\...

**1**

vote

**0**answers

65 views

### Extending risk neutral measure to insurance/mortality filtration

In insurance mathematics, one often models the underlying of an insurance policy with a Black Scholes model on a filtered probability space $(\Omega,\mathbb{Q},\mathcal{F},\mathbb{F}=(\mathcal{F}_{t}))...

**1**

vote

**1**answer

284 views

### Is it safe to work on a Cadlag modification of a Feller process?

Let $f$ be a continuous bounded function.
$X$ is a Feller process, and $\hat X$ is its Cadlag modification. By the definition of the modification, one can write
$$\mathbb E[f(X_t)] = \mathbb E[f(\hat ...

**1**

vote

**2**answers

112 views

### Is zero a regular point for a drifted $\alpha$-stable process?

We consider 1-d process of the form $Y_{t} = bt + M_{t}^{\alpha}$,
where $M_{t}^{\alpha}$ is $\alpha$-stable process for some $\alpha
\in (0,2)$ with its levy symbol $\eta(u) = - |u|^{\alpha}.$,
and $...

**2**

votes

**0**answers

191 views

### Asymptotics of Variable Drift Ornstein–Uhlenbeck Process

The Ornstein–Uhlenbeck process is defined as the stochastic process that solves the following SDE:
$dx_t = \theta (\mu-x_t)\,dt + \sigma\, dW_t$
where $\theta>0$, $\mu$ and $\sigma>0$ are ...

**4**

votes

**0**answers

157 views

### compactness of a probability set

I have a question about the compactness of a set of martingale measures. Let $\Omega=\mathcal{C}[0,1]$ be the space of continuous functions on $[0,1]$ and $\mathcal{M}_{\Omega}$ be the family of ...

**5**

votes

**3**answers

1k views

### One can earn nothing on the Brownian motion, true ?

Consider any discrete time stochastic process $p(n)$ (price) with independent increments $\xi_k$ and $E(\xi_k)=0$. E.g. Brownian motion (i.e. $\xi_k = N(0,1)$).
Consider some "trading strategy" ...

**0**

votes

**1**answer

442 views

### Mathematical properties of financial prices

Prices of financial assets (stock-market prices or currency exchange rates) obviously resemble trajectories of stochastic processes.
What is known about their mathematical properties ?
I know ...

**4**

votes

**1**answer

351 views

### Trajectorial version of Doob's $L^2$ inequality

In the paper http://www.mat.univie.ac.at/~schachermayer/pubs/preprnts/prpr0154.pdf
you can find a trajectorial version of Doob's inequality. It is given by:
$$\bar{s}^2_T+4\sum_{k=0}^{T-1}\bar{s_k}...

**1**

vote

**1**answer

574 views

### Solving an Ornstein-Uhlenbeck-like SDE $y(t,T)=H_t + \mathbb{E}[\int_t^T y(s-,T)dX_s|\mathcal{F}_t]$

I have asked a similar question involving some finance background some time ago here math.stackexchange, however no really good answer came up. I was able to find a solution at least for a special ...

**1**

vote

**2**answers

215 views

### market completion in stochastic volatility model

Hi all,
Consider a stochastic volatility model. As there are two sources of risk and one asset only, this is an imcomplete market. One can complete the market by considering a derivative V1 used to ...

**1**

vote

**0**answers

127 views

### stochastic volatility valuation equation

I'm trying to derive the valuation equation under a general stochastic volatility model. What one can read in the litterature is the following reasonning:
One consider a replicating self-financing ...