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Ichiro Yamamoto - One of the best experts on this subject based on the ideXlab platform.

Noboru Kobayashi - One of the best experts on this subject based on the ideXlab platform.

Ke Tang - One of the best experts on this subject based on the ideXlab platform.

  • latent jump Diffusion Factor estimation for commodity futures
    Journal of Commodity Markets, 2018
    Co-Authors: M A H Dempster, Elena Medova, Ke Tang
    Abstract:

    Abstract We introduce a new methodology to estimate the latent Factors of a jump Diffusion illustrated with an application to the commodity futures term structure. Specifically, we propose a new state space form and then use a modified Kalman filter to estimate models with latent jump-Diffusion Factors. The method is applied to oil and copper futures prices to pin down long and short term jumps in their futures term structure. Estimates of jump arrival times indicate that both important information surprises and market activities generate jumps of different intensities.

  • latent jump Diffusion Factor estimation for commodity futures
    Social Science Research Network, 2015
    Co-Authors: M A H Dempster, Elena Medova, Ke Tang
    Abstract:

    We introduce a new methodology to estimate the latent Factors of a multivariate jump Diffusion process illustrated with an application to the commodity futures term structure. Specifically, we propose a new state space form and then use a modified Kalman filter to estimate models with latent jump-Diffusion Factors. The method is applied to oil and copper futures prices to pin down long and short term jumps in their futures term structure. Estimates of jump arrival times indicate that both important information surprises and market activities generate jumps of different intensities.

Hiroshi Yamakawa - One of the best experts on this subject based on the ideXlab platform.

Sebastien Lleo - One of the best experts on this subject based on the ideXlab platform.

  • Jump-Diffusion Risk-Sensitive Asset Management II: Jump-Diffusion Factor Model
    SIAM Journal on Control and Optimization, 2013
    Co-Authors: Mark H A Davis, Sebastien Lleo
    Abstract:

    In this article we extend our earlier work on the jump-Diffusion risk-sensitive asset management problem in a Factor model [SIAM J. Financial Math., 2 (2011), pp. 22--54] by allowing jumps in both the Factor process and the asset prices, as well as stochastic volatility and investment constraints. In this case, the Hamilton--Jacobi--Bellman (HJB) equation is a partial integro-differential equation (PIDE). We are able to show that finding a viscosity solution to this PIDE is equivalent to finding a viscosity solution to a related PDE, for which classical results give uniqueness. With this in hand, a policy improvement argument and classical results on parabolic PDEs show that the HJB PIDE admits a unique smooth solution. The optimal investment strategy is given by the feedback control that minimizes the Hamiltonian function appearing in the HJB PIDE.

  • jump Diffusion risk sensitive asset management i Diffusion Factor model
    Siam Journal on Financial Mathematics, 2011
    Co-Authors: Mark H A Davis, Sebastien Lleo
    Abstract:

    This paper considers a portfolio optimization problem in which asset prices are represented by SDEs driven by Brownian motion and a Poisson random measure, with drifts that are functions of an auxiliary Diffusion Factor process. The criterion, following earlier work by Bielecki, Pliska, Nagai, and others, is risk-sensitive optimization (equivalent to maximizing the expected growth rate subject to a constraint on variance). By using a change of measure technique introduced by Kuroda and Nagai we show that the problem reduces to solving a certain stochastic control problem in the Factor process, which has no jumps. The main result of this paper is to show that the risk-sensitive jump-Diffusion problem can be fully characterized in terms of a parabolic Hamilton-Jacobi-Bellman PDE rather than a partial integro-differential equation, and that this PDE admits a classical $(C^{1,2})$ solution.

  • Jump-Diffusion Risk-Sensitive Asset Management II: Jump-Diffusion Factor Model
    arXiv: Portfolio Management, 2010
    Co-Authors: Mark H A Davis, Sebastien Lleo
    Abstract:

    In this article we extend earlier work on the jump-Diffusion risk-sensitive asset management problem [SIAM J. Fin. Math. (2011) 22-54] by allowing jumps in both the Factor process and the asset prices, as well as stochastic volatility and investment constraints. In this case, the HJB equation is a partial integro-differential equation (PIDE). By combining viscosity solutions with a change of notation, a policy improvement argument and classical results on parabolic PDEs we prove that the HJB PIDE admits a unique smooth solution. A verification theorem concludes the resolution of this problem.