Estimation of Tempered Stable Lévy Models of Infinite Variation

Truncated realized quadratic variations (TRQV) are among the most widely used high-frequency-based nonparametric methods to estimate the volatility of a process in the presence of jumps. Nevertheless, the truncation level is known to critically affect its performance, especially in the presence of infinite variation jumps. In this paper, we study the optimal truncation level, in the mean-square error sense, for a semiparametric tempered stable Lévy model. We obtain a novel closed-form 2nd-order approximation of the optimal threshold in a high-frequency setting. As an application, we propose a new estimation method, which combines iteratively an approximate semiparametric method of moment estimator and TRQVs with the newly found small-time approximation for the optimal threshold. The method is tested via simulations to estimate the volatility and the Blumenthal-Getoor index of a generalized CGMY model and, via a localization technique, to estimate the integrated volatility of a Heston type model with CGMY jumps. Our method is found to outperform other alternatives proposed in the literature when working with a Lévy process (i.e., the volatility is constant), or when the index of jump intensity Y is larger than 3/2 in the presence of stochastic volatility.

     

Explicit Solution of a Non-Linear Filtering Problem for Lévy Processes with Application to Finance

In this paper we explicitly solve a non-linear filtering problem with mixed observations, modelled by a Brownian motion and a generalized Cox process, whose jump intensity is given in terms of a Lévy measure. Motivated by empirical observations of R. Cont and P. Tankov we propose a model for financial assets, which captures the phenomenon of time inhomogeneity of the jump size density. We apply the explicit formula to obtain the optimal filter for the corresponding filtering problem.     

Invariant Measures and Symmetry Property of Lévy Type Operators

Second order elliptic integro-differential operators (Lévy type operators) are investigated. The notion of regular (infinitesimal) invariant probability measures for such operators is posed. Sufficient conditions for the existence of such regular infinitesimal invariant probability measures are obtained and the symmetrization problem is discussed.     

On the Lévy Measures for Symmetric Stable Semigroups on the Torus T∞

We investigate analytical properties of the Lévy measures fir symmetric stable semigroups on the compact Lie-projective group T. We apply these properties to describe the domain of the fractional powers of Laplacians on T. Among the analytical tools involved are the intrinsic metric and the scale of Hölder continuous functions w.r.t. this metric.     

On the Double Points of Operator Stable Lévy Processes

We determine the Hausdorff dimension of the set of double points for a symmetric operator stable Lévy process \(X=\left\{ X(t),t\in \mathbb {R}_+\right\} \) in terms of the eigenvalues of its stability exponent.     

Poisson Stable Solutions for Stochastic Differential Equations with Lévy Noise

In this paper,we use a unified framework to study Poisson stable(including stationary,periodic,quasi-periodic,almost periodic,almost automorphic,Birkhoff recurrent,almost recurrent in the sense of Bebutov,Levitan almost periodic,pseudo-periodic,pseudo-recurrent and Poisson stable)solutions for semilinear stochastic differential equations driven by infinite dimensional L′evy noise with large jumps.Under suitable conditions on drift,diffusion and jump coefficients,we prove that there exist solutions which inherit the Poisson stability of coefficients.Further we show that these solutions are globally asymptotically stable in square-mean sense.Finally,we illustrate our theoretical results by several examples.     

Fluctuations of Stable Processes and Exponential Functionals of Hypergeometric Lévy Processes

We study the distribution and various properties of exponential functionals of hypergeometric Lévy processes. We derive an explicit formula for the Mellin transform of the exponential functional and give both convergent and asymptotic series expansions of its probability density function. As applications we present a new proof of some of the results on the density of the supremum of a stable process, which were recently obtained in Hubalek and Kuznetsov (Electron. Commun. Probab. 16:84–95, 2011) and Kuznetsov (Ann. Probab. 39(3):1027–1060, 2011). We also derive several new results related to (i) the entrance law of a stable process conditioned to stay positive, (ii) the entrance law of the excursion measure of a stable process reflected at its past infimum, (iii) the distribution of the lifetime of a stable process conditioned to hit zero continuously and (iv) the entrance law and the last passage time of the radial part of a multidimensional symmetric stable process.     

Simulation of stochastic integrals with respect to Lévy processes of type G

We study the simulation of stochastic processes defined as stochastic integrals with respect to type G Lévy processes for the case where it is not possible to simulate the type G process exactly. The type G Lévy process as well as the stochastic integral can on compact intervals be represented as an infinite series. In a practical simulation we must truncate this representation. We examine the approximation of the remaining terms with a simpler process to get an approximation of the stochastic integral. We also show that a stochastic time change representation can be used to obtain an approximation of stochastic integrals with respect to type G Lévy processes provided that the integrator and the integrand are independent.     

Decomposition results for stochastic storage processes and queues with alternating Lévy inputs

In this paper we generalize known workload decomposition results for Lévy queues with secondary jump inputs and queues with server vacations or service interruptions. Special cases are polling systems with either compound Poisson or more general Lévy inputs. Our main tools are new martingale results, which have been derived in a companion paper.     

Harnack’s Inequality for Stable Lévy Processes

We prove Harnacks inequality for harmonic functions of a symmetric stable Lévy process on R^d without the assumption that the density function of its Lévy measure is locally bounded from below. Mathematics Subject Classifications (2000) Primary 60J45, 31C05; Secondary 60G51.Research partially supported by KBN (2P03A 041 22) and RTN (HPRN-CT-2001-00273-HARP).     

A Class of Lévy Driven SDEs and their Explicit Invariant Measures

We prove non-explosion results for Schrödinger perturbations of symmetric transition densities and Hardy inequalities for their quadratic forms by using explicit supermedian functions of their semigroups.     

The Invariant and Quasi-invariant Transformations of the Stable Lévy Processes

Let ξ(t),t∈[0,1] be a strictly stable Lévy process with the index of stability α∈(0,2). By ℘ _ξ we denote the law of ξ in the Skorokhod space . For arbitrary ξ we construct ℘ _ξ -quasi-invariant semigroup of transformations of . Under some nondegeneracy condition on the spectral measure of the stable process we construct ℘ _ξ -quasi-invariant group of transformations of . In symmetric case this group is a group of the invariant transformations.      

Maximal Inequalities of the Itô Integral with Respect to Poisson Random Measures or Lévy Processes on Banach Spaces

We are interested in maximal inequalities satisfied by a stochastic integral driven by a Poisson random measure in a general Banach space.     

The Entrance Laws of Self-Similar Markov Processes and Exponential Functionals of Lévy Processes

We consider the asymptotic behavior of semi-stable Markov processes valued in ]0,[ when the starting point tends to 0. The entrance distribution is expressed in terms of the exponential functional of the underlying Lévy process which appears in Lamperti's representation of a semi-stable Markov process.     

Lévy Approximation of Increment Processes with Markov Switching

We study weak convergence of increment processes with embedded Markov chain switching in a series scheme. The limit process is a Lévy process where the jump part is a compound Poisson process. A result concerning the rate of convergence is also given. This study is motivated by risk theory and its applications.