Long-term and blow-up behaviors of exponential moments in multi-dimensional affine diffusions

DOI10.1016/J.SPA.2012.05.007MaRDI QIDQ436302zbMATHOpenAlexFDO

Authors Rudra P. Jena, Kyoung-Kuk Kim, Hao Xing

Publication date 20 July 2012

Published in Stochastic Processes and their Applications (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/1010.2865

zbMATH Keywords

exponential momentsimplied volatilityaffine diffusionsRiccati differential equations

Mathematics Subject Classification ID

Derivative securities (option pricing, hedging, etc.) (91G20) Diffusion processes (60J60) Financial applications of other theories (91G80)

Abstract: This paper considers multi-dimensional affine processes with continuous sample paths. By analyzing the Riccati system, which is associated with affine processes via the transform formula, we fully characterize the regions of exponents in which exponential moments of a given process do not explode at any time or explode at a given time. In these two cases, we also compute the long-term growth rate and the explosion rate for exponential moments. These results provide a handle to study implied volatility asymptotics in models where returns of stock prices are described by affine processes whose exponential moments do not have an explicit formula.

Recommendations

• Exponential moments of affine processes
• Moment explosions and long-term behavior of affine stochastic volatility models
• Moment explosions and stationary distributions in affine diffusion models
• Exponentially affine martingales, affine measure changes and exponential moments of affine processes
• Stochastic equation and exponential ergodicity in Wasserstein distances for affine processes

Cites work

• scientific article; zbMATH DE number 1581767 (Why is no real title available?)
• scientific article; zbMATH DE number 3174663 (Why is no real title available?)
• scientific article; zbMATH DE number 734901 (Why is no real title available?)
• scientific article; zbMATH DE number 1414609 (Why is no real title available?)
• scientific article; zbMATH DE number 3204015 (Why is no real title available?)
• A closed-form solution for options with stochastic volatility with applications to bond and currency options
• A theory of the term structure of interest rates
• Affine processes and applications in finance
• Affine processes are regular
• Affine processes on positive semidefinite matrices
• An equilibrium characterization of the term structure
• Critical points at infinity and blow up of solutions of autonomous polynomial differential systems via compactification
• Gewöhnliche Differentialungleichungen mit quasimonoton wachsenden Funktionen in topologischen Vektorräumen. (Ordinary differential equations with quasi-monotone increasing functions in topological vector spaces)
• Moment explosions and long-term behavior of affine stochastic volatility models
• Moment explosions and stationary distributions in affine diffusion models
• Moment explosions in stochastic volatility models
• Numerical approximations of strong (un)stable manifolds
• Painlevé analysis and normal forms theory
• Quadratic form of stable sub‐manifold for power systems
• Smile Asymptotics II: Models with Known Moment Generating Functions
• Stability analysis of Riccati differential equations related to affine diffusion processes
• Stability regions of nonlinear autonomous dynamical systems
• THE MOMENT FORMULA FOR IMPLIED VOLATILITY AT EXTREME STRIKES
• The large-maturity smile for the Heston model
• Transform Analysis and Asset Pricing for Affine Jump-diffusions

Cited in

(14)

• Ergodicity of affine processes on the cone of symmetric positive semidefinite matrices
• Explosion time for some Laplace transforms of the Wishart process
• Existence of limiting distribution for affine processes
• Affine diffusions with non-canonical state space
• Exponentially affine martingales, affine measure changes and exponential moments of affine processes
• Moment explosions and long-term behavior of affine stochastic volatility models
• Capital income jumps and wealth distribution
• On parameter estimation for critical affine processes
• Large deviations for affine diffusion processes on \(\mathbb R_+^m \times\mathbb R^n\)
• Exponential moments of affine processes
• Stationarity and ergodicity for an affine two-factor model
• Moment explosions and stationary distributions in affine diffusion models
• Stochastic equation and exponential ergodicity in Wasserstein distances for affine processes
• Affine diffusion processes: theory and applications

This page was built for publication: Long-term and blow-up behaviors of exponential moments in multi-dimensional affine diffusions

Report a bug (only for logged in users!)Click here to report a bug for this page (MaRDI item Q436302)