Affine processes beyond stochastic continuity

DOI10.1214/19-AAP1483zbMATH Open1432.60073arXiv1804.07556MaRDI QIDQ2299583FDOQ2299583

Authors: Yanyan Li 

Publication date: 21 February 2020

Published in: The Annals of Applied Probability (Search for Journal in Brave)

Abstract: In this paper we study time-inhomogeneous affine processes beyond the common assumption of stochastic continuity. In this setting times of jumps can be both inaccessible and predictable. To this end we develop a general theory of finite dimensional affine semimartingales under very weak assumptions. We show that the corresponding semimartingale characteristics have affine form and that the conditional characteristic function can be represented with solutions to measure differential equations of Riccati type. We prove existence of affine Markov processes and affine semimartingales under mild conditions and elaborate on examples and applications including affine processes in discrete time.

Full work available at URL: https://arxiv.org/abs/1804.07556

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zbMATH Keywords

option pricingMarkov processsemimartingalemeasure differential equationsdefault riskdividendsinterest rateaffine processannouncement effectsstochastic discontinuity

Mathematics Subject Classification ID

Derivative securities (option pricing, hedging, etc.) (91G20) Continuous-time Markov processes on general state spaces (60J25)

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Cited In (24)

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• Affine realizations with affine state processes for stochastic partial differential equations
• Regularity of affine processes on general state spaces
• Noncausal affine processes with applications to derivative pricing
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• OPTIMAL CROSS-CURRENCY MORTGAGE DECISIONS
• Affine processes on \(\mathbb{R}_+^m\times\mathbb{R}^n\) and multiparameter time changes
• Term structure modeling with overnight rates beyond stochastic continuity
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• Affine Volterra processes
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• DEFAULTABLE TERM STRUCTURES DRIVEN BY SEMIMARTINGALES
• Path properties and regularity of affine processes on general state spaces
• Term structure modelling for multiple curves with stochastic discontinuities
• Affine models with path-dependence under parameter uncertainty and their application in finance
• Term structure modeling of SOFR: evaluating the importance of scheduled jumps
• Affine diffusions and related processes: simulation, theory and applications
• Time-inhomogeneous affine processes
• Existence of limiting distribution for affine processes
• A didactic note on affine stochastic volatility models
• Markov-modulated affine processes
• The martingale problem method revisited
• Coupling methods and exponential ergodicity for two‐factor affine processes
• Non-linear affine processes with jumps

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