arXiv subjects

Gordan Žitković

Publications and source records attributed to Gordan Žitković.

10 recordsLinked to original sources

arXiv2026

A Superprocess-based Approach to Rough CIR Processes and Feller Random Measures

Feller random measures generalize the Feller diffusion (the CIR process) by giving it memory. They arise as the scaling limits of nearly unstable Hawkes processes, and include the rough CIR process and its hyper-rough and discontinuous relatives. We show that every Feller random measure is the occupation measure of a Dawson--Watanabe superprocess whose spatial motion is a killed Lévy subordinator, integrated over the branching time. This is a continuum analogue of the Hawkes--Oakes cluster representation. It yields existence, stability in the parameters, and stochastic equations driven by an explicit noise. The structure of this noise depends on whether the kernel has an atom at the origin. Without an atom, the noise is a Brownian motion time-changed by the distribution function of the measure. This leads to a martingale characterization and to sharp results on densities and their Hölder regularity. With an atom, the noise is a compensated inverse-Gaussian process time-changed by the compensator of that distribution function, and the measure is purely atomic.

math.PR↗

arXiv2023

Existence and uniqueness for non-Markovian triangular quadratic BSDEs

We prove the existence and uniqueness of solutions to a class of quadratic BSDE systems which we call triangular quadratic. Our results generalize several existing results about diagonally quadratic BSDEs in the non-Markovian setting. As part of our analysis, we obtain new results about linear BSDEs with unbounded coefficients, which may be of independent interest. Through a non-uniqueness example, we answer a "crucial open question" raised by Harter and Richou by showing that the stochastic exponential of an n x n matrix-valued BMO martingale need not satisfy a reverse Hölder inequality.

math.PR↗

arXiv2022

Kyle's Model with Stochastic Liquidity

We construct an equilibrium for the continuous time Kyle's model with stochastic liquidity, a general distribution of the fundamental price, and correlated stock and volatility dynamics. For distributions with positive support, our equilibrium allows us to study the impact of the stochastic volatility of noise trading on the volatility of the asset. In particular, when the fundamental price is log-normally distributed, informed trading forces the log-return up to maturity to be Gaussian for any choice of noise-trading volatility even though the price process itself comes with stochastic volatility. Surprisingly, we find that in equilibrium both Kyle's Lambda and its inverse (the market depth) are submartingales.

q-fin.TR↗

arXiv2022

A characterization of solutions of quadratic BSDEs and a new approach to existence

We provide a novel characterization of the solutions of a quadratic BSDE, which is analogous to the characterization of local martingales by convex functions. We then use our main result to show that BSDE solutions are closed under ucp convergence. Finally, we use our closure result obtain a sufficient condition for existence, and discuss specific cases in which this sufficient condition can be verified.

math.PR↗

arXiv2018

Conditional Davis Pricing

We study the set of marginal utility-based prices of a financial derivative in the case where the investor has a non-replicable random endowment. We provide an example showing that even in the simplest of settings - such as Samuelson's geometric Brownian motion model - the interval of marginal utility-based prices can be a non-trivial strict subinterval of the set of all no-arbitrage prices. This is in stark contrast to the case with a replicable endowment where non- uniqueness is exceptional. We provide formulas for the end points for these prices and illustrate the theory with several examples.

q-fin.MF↗

arXiv2017

A class of globally solvable Markovian quadratic BSDE systems and applications

We establish existence and uniqueness for a wide class of Markovian systems of backward stochastic differential equations (BSDE) with quadratic nonlinearities. This class is characterized by an abstract structural assumption on the generator, an a-priori local-boundedness property, and a locally-Hölder-continuous terminal condition. We present easily verifiable sufficient conditions for these assumptions and treat several applications, including stochastic equilibria in incomplete financial markets, stochastic differential games, and martingales on Riemannian manifolds.

math.PR↗

arXiv2017

Incomplete stochastic equilibria for dynamic monetary utility

We study existence and uniqueness of continuous-time stochastic Radner equilibria in an incomplete market model among a group of agents whose preference is characterized by cash invariant time-consistent monetary utilities. An assumption of "smallness" type is shown to be sufficient for existence and uniqueness. In particular, this assumption encapsulates settings with small endowments, small time-horizon, or a large population of weakly heterogeneous agents. Central role in our analysis is played by a fully-coupled nonlinear system of quadratic BSDEs.

math.PR↗

arXiv2016

An expansion in the model space in the context of utility maximization

In the framework of an incomplete financial market where the stock price dynamics are modeled by a continuous semimartingale (not necessarily Markovian) an explicit second-order expansion formula for the power investor's value function - seen as a function of the underlying market price of risk process - is provided. This allows us to provide first-order approximations of the optimal primal and dual controls. Two specific calibrated numerical examples illustrating the accuracy of the method are also given.

q-fin.PM↗

arXiv2013

On utility maximization under convex portfolio constraints

We consider a utility-maximization problem in a general semimartingale financial model, subject to constraints on the number of shares held in each risky asset. These constraints are modeled by predictable convex-set-valued processes whose values do not necessarily contain the origin; that is, it may be inadmissible for an investor to hold no risky investment at all. Such a setup subsumes the classical constrained utility-maximization problem, as well as the problem where illiquid assets or a random endowment are present. Our main result establishes the existence of optimal trading strategies in such models under no smoothness requirements on the utility function. The result also shows that, up to attainment, the dual optimization problem can be posed over a set of countably-additive probability measures, thus eschewing the need for the usual finitely-additive enlargement.

q-fin.PM↗

arXiv2009

A dual characterization of self-generation and exponential forward performances

We propose a mathematical framework for the study of a family of random fields--called forward performances--which arise as numerical representation of certain rational preference relations in mathematical finance. Their spatial structure corresponds to that of utility functions, while the temporal one reflects a Nisio-type semigroup property, referred to as self-generation. In the setting of semimartingale financial markets, we provide a dual formulation of self-generation in addition to the original one, and show equivalence between the two, thus giving a dual characterization of forward performances. Then we focus on random fields with an exponential structure and provide necessary and sufficient conditions for self-generation in that case. Finally, we illustrate our methods in financial markets driven by Itô-processes, where we obtain an explicit parametrization of all exponential forward performances.

q-fin.CP↗