arXiv subjects

Igor Cialenco

Publications and source records attributed to Igor Cialenco.

50 records · Page 3Linked to original sources

arXiv2014

A note on error estimation for hypothesis testing problems for some linear SPDEs

The aim of the present paper is to estimate and control the Type I and Type II errors of a simple hypothesis testing problem of the drift/viscosity coefficient for stochastic fractional heat equation driven by additive noise. Assuming that one path of the first $N$ Fourier modes of the solution is observed continuously over a finite time interval $[0,T]$, we propose a new class of rejection regions and provide computable thresholds for $T$, and $N$, that guarantee that the statistical errors are smaller than a given upper bound. The considered tests are of likelihood ratio type. The main ideas, and the proofs, are based on sharp large deviation bounds. Finally, we illustrate the theoretical results by numerical simulations.

math.PR↗

arXiv2014

Hypothesis testing for stochastic PDEs driven by additive noise

We study the simple hypothesis testing problem for the drift coefficient for stochastic fractional heat equation driven by additive noise. We introduce the notion of asymptotically the most powerful test, and find explicit forms of such tests in two asymptotic regimes: large time asymptotics, and increasing number of Fourier modes. The proposed statistics are derived based on Maximum Likelihood Ratio. Additionally, we obtain a series of important technical results of independent interest: we find the cumulant generating function of the log-likelihood ratio; obtain sharp large deviation type results for $T\to\infty$ and $N\to\infty$.

math.ST↗

arXiv2013

No-Arbitrage Pricing for Dividend-Paying Securities in Discrete-Time Markets with Transaction Costs

We prove a version of First Fundamental Theorem of Asset Pricing under transaction costs for discrete-time markets with dividend-paying securities. Specifically, we show that the no-arbitrage condition under the efficient friction assumption is equivalent to the existence of a risk-neutral measure. We derive dual representations for the superhedging ask and subhedging bid price processes of a derivative contract. Our results are illustrated with a vanilla credit default swap contract.

q-fin.GN↗

arXiv2013

Dynamic Conic Finance: Pricing and Hedging in Market Models with Transaction Costs via Dynamic Coherent Acceptability Indices

In this paper we present a theoretical framework for determining dynamic ask and bid prices of derivatives using the theory of dynamic coherent acceptability indices in discrete time. We prove a version of the First Fundamental Theorem of Asset Pricing using the dynamic coherent risk measures. We introduce the dynamic ask and bid prices of a derivative contract in markets with transaction costs. Based on these results, we derive a representation theorem for the dynamic bid and ask prices in terms of dynamically consistent sequence of sets of probability measures and risk-neutral measures. To illustrate our results, we compute the ask and bid prices of some path-dependent options using the dynamic Gain-Loss Ratio.

q-fin.RM↗

arXiv2012

Approximation of Stochastic Partial Differential Equations by a Kernel-based Collocation Method

In this paper we present the theoretical framework needed to justify the use of a kernel-based collocation method (meshfree approximation method) to estimate the solution of high-dimensional stochastic partial differential equations (SPDEs). Using an implicit time stepping scheme, we transform stochastic parabolic equations into stochastic elliptic equations. Our main attention is concentrated on the numerical solution of the elliptic equations at each time step. The estimator of the solution of the elliptic equations is given as a linear combination of reproducing kernels derived from the differential and boundary operators of the SPDE centered at collocation points to be chosen by the user. The random expansion coefficients are computed by solving a random system of linear equations. Numerical experiments demonstrate the feasibility of the method.

math.NA↗

arXiv2012

Collateralized CVA Valuation with Rating Triggers and Credit Migrations

In this paper we discuss the issue of computation of the bilateral credit valuation adjustment (CVA) under rating triggers, and in presence of ratings-linked margin agreements. Specifically, we consider collateralized OTC contracts, that are subject to rating triggers, between two parties -- an investor and a counterparty. Moreover, we model the margin process as a functional of the credit ratings of the counterparty and the investor. We employ a Markovian approach for modeling of the rating transitions of the two parties to the contract. In this framework, we derive the representation for bilateral CVA. We also introduce a new component in the decomposition of the counterparty risky price: namely the rating valuation adjustment (RVA) that accounts for the rating triggers. We give two examples of dynamic collateralization schemes where the margin thresholds are linked to the credit ratings of the parties. We account for the rehypothecation risk in the presence of independent amounts. Our results are illustrated via computation of various counterparty risk adjustments for a CDS contract and for an IRS contract.

q-fin.PR↗

arXiv2011

Counterparty Risk and the Impact of Collateralization in CDS Contracts

We analyze the counterparty risk embedded in CDS contracts, in presence of a bilateral margin agreement. First, we investigate the pricing of collateralized counterparty risk and we derive the bilateral Credit Valuation Adjustment (CVA), unilateral Credit Valuation Adjustment (UCVA) and Debt Valuation Adjustment (DVA). We propose a model for the collateral by incorporating all related factors such as the thresholds, haircuts and margin period of risk. We derive the dynamics of the bilateral CVA in a general form with related jump martingales. We also introduce the Spread Value Adjustment (SVA) indicating the counterparty risk adjusted spread. Counterparty risky and the counterparty risk-free spread dynamics are derived and the dynamics of the SVA is found as a consequence. We finally employ a Markovian copula model for default intensities and illustrate our findings with numerical results.

q-fin.RM↗

arXiv2011

Dynamic Coherent Acceptability Indices and their Applications to Finance

In this paper we present a theoretical framework for studying coherent acceptability indices in a dynamic setup. We study dynamic coherent acceptability indices and dynamic coherent risk measures, and we establish a duality between them. We derive a representation theorem for dynamic coherent risk measures in terms of so called dynamically consistent sequence of sets of probability measures. Based on these results, we give a specific construction of dynamic coherent acceptability indices. We also provide examples of dynamic coherent acceptability indices, both abstract and also some that generalize selected classical financial measures of portfolio performance.

q-fin.RM↗

arXiv2011

Parameter Estimation for the Stochastically Perturbed Navier-Stokes Equations

We consider a parameter estimation problem to determine the viscosity $ν$ of a stochastically perturbed 2D Navier-Stokes system. We derive several different classes of estimators based on the first $N$ Fourier modes of a single sample path observed on a finite time interval. We study the consistency and asymptotic normality of these estimators. Our analysis treats strong, pathwise solutions for both the periodic and bounded domain cases in the presence of an additive white (in time) noise.

math.PR↗

arXiv2010

Parameter estimations for SPDEs with multiplicative fractional noise

We study parameter estimation problem for diagonalizable stochastic partial differential equations driven by a multiplicative fractional noise with any Hurst parameter $H\in(0,1)$. Two classes of estimators are investigated: traditional maximum likelihood type estimators, and a new class called closed-form exact estimators. Finally the general results are applied to stochastic heat equation driven by a fractional Brownian motion.

math.PR↗

arXiv2008

Asymptotic Properties of the Maximum Likelihood Estimator for Stochastic Parabolic Equations with Additive Fractional Brownian Motion

A parameter estimation problem is considered for a diagonaliazable stochastic evolution equation using a finite number of the Fourier coefficients of the solution. The equation is driven by additive noise that is white in space and fractional in time with the Hurst parameter $H\geq 1/2$. The objective is to study asymptotic properties of the maximum likelihood estimator as the number of the Fourier coefficients increases. A necessary and sufficient condition for consistency and asymptotic normality is presented in terms of the eigenvalues of the operators in the equation.

math.PR↗

arXiv2008

Absence of eigenvalues for integro-differential operators with periodic coefficients

Applying perturbation theory methods, the absence of the point spectrum for some nonselfadjoint integro-differential operators is investigated. The considered differential operators are of arbitrary order and act in either $\mathbf{L}_{p}(\mathbb{R}_{+})$ or $\mathbf{L}_{p}(\mathbb{R}) (1\leq p<\infty)$. As an application of general results, new spectral properties of the perturbed Hill operator are derived.

math.SP↗

arXiv2007

Parameter estimation in diagonalizable bilinear stochastic parabolic equations

A parameter estimation problem is considered for a stochastic parabolic equation with multiplicative noise under the assumption that the equation can be reduced to an infinite system of uncoupled diffusion processes. From the point of view of classical statistics, this problem turns out to be singular not only for the original infinite-dimensional system but also for most finite-dimensional projections. This singularity can be exploited to improve the rate of convergence of traditional estimators as well as to construct completely new closed-form exact estimator.

math.PR↗

arXiv2007

On the point spectrum of some perturbed differential operators with periodic coefficients

Finiteness of the point spectrum of linear operators acting in a Banach space is investigated from point of view of perturbation theory. In the first part of the paper we present an abstract result based on analytical continuation of the resolvent function through continuous spectrum. In the second part, the abstract result is applied to differential operators which can be represented as a differential operator with periodic coefficients perturbed by an arbitrary subordinated differential operator.

math.SP↗