Affine Diffusion Processes: Theory and Applications
By Damir Filipovi'c, Eberhard Mayerhofer. 2009
99 citations recorded by the source corpus.
We revisit affine diffusion processes on general and on the canonical state space in particular. A detailed study of theoretic and applied aspects of this class of Markov processes is given. In particular, we derive admissibility conditions and provide a full proof of existence and uniqueness through stochastic invariance of the canonical state space. Existence of exponential moments and the full range of validity of the affine transform formula are established. This is applied to the pricing of bond and stock options, which is illustrated for the Vasicek Cox-Ingersoll-Ross and Heston Models.
Subfields: Economics and Econometrics, Finance
View Paper: https://www.semanticscholar.org/paper/2542ee3cc3e82427c14a0ceedc3a8b00eab6cadb
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Citations in the corpus
- Density Approximations for Multivariate Affine Jump-Diffusion Processes (2011, unknown): “We refer to the discussion of the diffusion case in Filipović and Mayerhofer (2009), see also Filipović (2009, Chapter 10).”
- Exponential moments of affine processes (2011, methodology): “…the literature on affine processes in financial mathematics, we refer to Duffie, Filipović and Schachermayer (2003), Section 13; for an easy-to-read introduction to discounting and pricing techniques (using the Fourier– Laplace transform), we refer to Filipović and Mayerhofer (2009), Section 4.”
- Properties of Foreign Exchange Risk Premiums (2012, unknown): “where φ(τ, u) and φ(τ, u) solve a system of Riccati equations Filipović and Mayerhofer (2009) with τ ≡ T − t”
- Affine Processes on Positive Semidefinite Matrices (2009, unknown): “4For the diffusion case see also [20] or [19], Chapter 10.”